Thorne v. Travellers Insurance Co.

• Decision Date: 06 January 1876
• Citation: 80 Pa. 15
• Parties: Thorne <I>et al. versus</I> Travellers Insurance Co.
• Court: Pennsylvania Supreme Court

Page 15

80 Pa. 15

Thorne et al. versus Travellers Insurance Co.

Supreme Court of Pennsylvania.

October __, 1875.

January 6, 1876.

October __ 1875.

Before AGNEW, C. J., SHARSWOOD, WILLIAMS, MERCUR, GORDON, PAXSON and WOODWARD, JJ.

Error to the District Court of Allegheny county: Of October and November Term 1874, No. 177.

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Wier & Gibson, A. M. Brown and S. A. Purviance, for plaintiffs in error.—An action founded on the violation of law cannot be maintained: Maybin v. Coulon, 4 Dallas 298. The test is whether the plaintiffs require the aid of the illegal transaction to establish their case: Swan v. Scott, 11 S. & R. 161; Thomas v. Brady, 10 Barr 164; Scott v. Duffy, 2 Harris 20. When an act is prohibited under a penalty it is void: Burkholder v. Beetem, 15 P. F. Smith 496; Holt v. Green, 23 Id. 198; Armstrong v. Toler, 11 Wheaton 258; Craig v. Missouri, 4 Peters 426; Robey v. West, 4 N. H. 285; Pray v. Burbank, 10 Id. 377; Bancroft v. Dundas, 21 Verm. 456; Boutwell v. Foster, 24 Id. 485. In relation to liability on contracts, &c., of insurance companies who have not complied with statutory requisitions, they cited: Ætna Ins. Co. v. Harvey, 11 Wis. 414; Buxton v. Hamblen, 32 Maine 448; Gibson v. Service, 5 Taunton 433; Lindsey v. Rutherford, 17 B. Monroe 245; Rising Sun Ins. Co. v. Slaughter, 20 Ind. 520.

S. M. Raymond, C. B. M. Smith and A. H. Miller, for defendants in error.—The certificates of the auditor-general are conclusive: Act of March 31st 1823, sect. 1, 8 Sm. Laws 144; 1 Br. Purd. 628, pl. 41. Parol evidence is inadmissible to vitiate a record: Dickson v. Fisher, 1 W. Bl. 664; Adams v. Betz, 1 Watts 425.

Mr. Justice MERCUR delivered the opinion of the court, January 6th 1876.

Although twenty-seven errors were assigned, eight only were urged on the argument. The main contention in the case arises under the 4th, 5th, 6th, 7th and 8th assignments. They will be considered together. They raise the question of the effect upon the rights of the defendants in error, on their failing to comply with the requirements of the Act of 11th April 1868, Purd. Dig. 796, pl. 28.

The defendants in error are a foreign life and accident insurance company, organized under the laws of the state of Connecticut. Thorne had been acting as an agent for the company, in the western part of Pennsylvania. This action was on a bond, executed by himself and sureties conditioned, inter alia, that he should pay over to the company the premiums or money received by him, for it, from any source. The claim was to recover premiums received and retained by him. The bond is dated 25th of July 1870. He ceased to act as agent the 5th of November of the same year. He is sought to be charged with money received by him as agent for the company during the intervening time.

The Act of 11th April 1868 is designed to establish a complete system, under which alone such a company, incorporated in another state, can transact business in this state.

Sect. 2, requires the company shall first appoint an agent resident within this state, and file in the office of the auditor-general a certified copy of the resolution appointing him.

Sect. 5, requires the agent to give a bond with sureties in the sum of five thousand dollars, conditioned for the faithful discharge of all the duties enjoined on him by the act. The bond shall be duly approved and recorded, and then be deposited in the office of the auditor-general.

Sect. 10, gives such agent power to transact business in every county of the Commonwealth, either in person or by subordinate agents appointed by him, and he "may from time to time appoint as many subordinate agents as he may deem proper, and certify the names and residences of the same to the auditor-general, who thereupon shall issue to each of said subordinate agents, upon payment of the usual fee of his office, a certificate showing that ........., the agent, has full power and authority to transact business in any part of this Commonwealth, and that he has designated such person as his subordinate agent; and no person shall act as a subordinate agent until he has received such certificate." Thus it appears a subordinate agent cannot be appointed otherwise than through and by this certificate of the auditor-general. Without such certificate he is absolutely forbidden to act by the most positive and imperative language.

Sect. 12, prescribes the punishment which shall be inflicted on any person who shall receive premiums, forward applications, or in any way transact business for the company, without having received authority so to do, agreeably to the provisions of the act. It declares "he shall be deemed guilty of a misdemeanor, and upon conviction thereof shall be fined five hundred dollars for each offence." The penalties given by this section are not limited to those illegally acting as agents, but extend to the company thus suffering them to act. It declares any party receiving applications from, or sending policies to, any person not duly authorized to act as agent, shall be fined in a like sum of five hundred dollars for each offence and be prohibited from doing business in this state until the fine is fully paid.

Sect. 13, enjoins upon the district attorneys of the several counties the duties of examining every licensed agent transacting business in their respective counties; and the books of said agency, "once in each and every year," and to enforce this act and all of its penalties against such agents, persons and companies as may offend against its provisions.

If Thorne was not duly qualified under the statute to act as agent, but did so act under instructions from the company, both he and the company were acting in violation of the express commands of the statute. If so acting, can the company sustain this suit, based on such an illegal transaction?

There can be no doubt of the constitutional power of the legislature to prescribe the conditions under which a foreign corporation shall transact business in this state, and the manner in which its agents shall be qualified, before entering on their duties.

It has often been held that an action founded on a transaction prohibited by statute cannot be maintained, although a penalty be imposed for violating the law, and it be not expressly declared that the contract be void: Mitchell v. Smith, 1 Binn. 118; Seidenbender et al. v. Charles' Administrators, 4 S. & R. 151; Swan v. Scott, 11 S. & R. 155; Columbia Bridge Co. v. Haldeman, 7 W. & S. 233; Thomas v. Brady, 10 Barr 164; Scott v. Duffy, 2 Harris 20; Holt v. Green, 23 P. F. Smith 198. In this last case it was said, the objection may often sound very ill in the mouth of defendant; but it is not for his sake the objection is allowed. It is founded on general principles of policy which he shall have the advantage of, contrary to the real justice between the parties. That principle of public policy is, that no court will lend its aid to a party who grounds his action upon an immoral or an illegal act. It is claimed, however, that conceding the rule that an illegal contract will not be enforced by a court, yet when it has been executed by the parties themselves, and the illegal object of it has been accomplished, the money or thing which was the price of it may be a legal consideration between the parties for a promise express or implied; and the court will not unravel the transaction to discover its origin. We may concede this view of the law to be correct, as an abstract proposition; yet it by no means controls this case. This is not an action against Thorne alone, for money had and received. It is against him and his sureties jointly, on their bond, for his alleged breach of duty as a duly appointed agent of the corporation. That he had been "duly appointed" is...