Sanders v. Neely , 197 Miss. 66 ( 1944 )

PARTIALLY DISSENTING OPINION. I cannot agree with the majority opinion in its entirety. I think Sections 5628 and 5715, Code 1942, have some effect, else there was no need to enact them. These two sections cover in their scope the financial condition of the Insurance Company and its method of doing business. Within that field and to that extent they apply alike to each and every stockholder, and within their scope are, in my opinion, exclusive of other remedies. Section 5628 provides that five or more stockholders may require an examination of an insurance company by the Commissioner of Insurance upon application to him accompanied by affidavit that such company is in an unsound condition. Unsound is not the equivalent of insolvent. It would not necessarily follow that stockholders were condemning their corporation by saying that in their opinion it was in an unsound condition. This might relate to the management or perhaps to the mere failure to pay a dividend when other like corporations were paying dividends. In addition to this, such application to the Commissioner is not necessarily public. In other words, the procedure outlined in that Section need not do harm to the corporation. Section 5715 provides that any citizen of the state, whether a stockholder or not, may complain that any insurance company authorized to do business in this state has violated any of the provisions of Chapter 3, Code of 1942, and thereby require the Commissioner to diligently investigate the matter. There may be some question whether this section is limited to foreign corporations, but counsel for appellee in this case concede it is available to Sanders, who is a resident of Mississippi.

The outstanding purpose of the state legislature in creating the Department of Insurance and making it a part of the state government was to protect the interests and rights of the policyholders in insurance companies. Many policyholders have their life's savings invested in these companies. It is a very important matter to the state that the policies be paid and the savings of investors be not lost. In guarding the rights of the policyholders the legislature is also protecting the rights of the stockholders and others who are financially interested in life insurance companies. The whole legislative scheme is for supervision and control of these companies by a state official. The Commissioner of Insurance is a state officer and is elected by the people of the entire state. He must possess the same qualifications as the Secretary of State. He is required to take an oath of office and execute a bond in the sum of $25,000. His duties and powers are extensive. No insurance corporation may be created in this state without his approval of the charter. He must approve the articles of association and the by-laws; ascertain the net value of every policy; require reserves and securities to be deposited; pass on the forms of policies; permit or deny the sale of stock in this state and the increase or reduction of the capital stock; supervise the agents of insurance companies; make a thorough examination of the financial condition of all insurance companies and their methods of doing business. He must do that at stated times and may do so at any time. He reports to the Auditor each month all taxes and license fees received by him; makes an annual report to the Governor showing the condition of all insurance companies, the licenses issued by him and the taxes paid to him, with a condensed statement of all the reports of the insurance companies to him. The Governor transmits this report to the legislature. It is the duty of the Commissioner to see that all laws relating to insurance matters are faithfully executed and he may enforce compliance with said laws by suit in the name of the state. The insurance companies are required to submit numerous reports and statements to the Commissioner accompanied by oath showing the business and financial standing of the company and the amount of reserves and the schedule of Mississippi securities. All reports of the companies to the Commissioner and the results of all examinations by him, and all of his reports to the Governor are public and open to the inspection and examination of all stockholders. Apparently these sources would afford any stockholder ample opportunity to ascertain any fact or information relating to the financial condition or management of the corporation. It therefore seems to me clear that within the scope of the foregoing inspection statutes they are exclusive. That has been the result where special statutes provide for the appointment of receivers of insurance companies. Grimes v. Central Ins. Co., 172 Ky. 18, 188 S.W. 901, 903. It has likewise been the result in the appointment of receivers of building and loan associations. Wright v. Federal Reserve Ins. Co.,131 Kan. 601, 293 P. 945; State ex rel. Bettman v. Court of Common Pleas,124 Ohio St. 269, 178 N.E. 258, 78 A.L.R. 1079; Huntington County Loan Sav. Ass'n v. Fulk, 158 Ind. 113, 63 N.E. 123. That has been the effect on the right of stockholders in building and loan associations to inspect the books and records of the corporation where statutes have provided for inspection and examination by a state official. State of Washington ex rel. Wicks v. Puget Sound Sav. Loan Ass'n,8 Wn.2d 599, 113 P.2d 70, 134 A.L.R. 696.

Burns v. Drennen, 220 Ala. 404, 125 So. 667, 668, cited in the main opinion, does not hold to the contrary. In that case Alabama had a statute which conferred the absolute right upon a stockholder to examine and inspect the books, the only limitation being "at reasonable and proper times." Nor does Guthrie v. Harkness, cited in the main opinion, hold to the contrary. Utah had in substance the same statute as Alabama. That statute was enacted after the enactment of the National Banking Act. The question was whether the Utah statute applied to national banks. It did. In addition, the reports of national banks to the comptroller and the result of his inspections of such banks are not open to the public nor to the stockholders.

If Sanders has the right to inspect all the records of this corporation to learn how the affairs are being conducted and "in order that he may protect the business," then every stockholder of this, and all like corporations, has the same right. In some such corporations there are thousands of stockholders. Nor does the amount of stock affect the right. The owner of one share would have the same right as the owner of a thousand shares. And if such right exists, a court cannot deny it, and the same shareholder might exercise it as often as he desired. No insurance corporation, so harassed, could continue to exist.

What I have said should apply and be limited to all questions which affect policyholders alike. If the information sought by the shareholder pertains especially to some question peculiar to his stock these statutes do not apply and his common law right of inspection is in full force. As to all questions affecting all stockholders alike these sections are exclusive and must be followed. If the Commissioner should refuse to grant the request (and he has no discretion if the shareholders comply with Section 5628) he might then resort to the court, showing such wrongful refusal. In all other cases not covered by these sections the common law right of inspection exists. This result would carry out the object and purpose of the statutes, serve the public policy of the state and at the same time preserve the rights of the stockholders.

Anderson, J., joins in this opinion.