Calvin Phillips & Co. v. Fishback , 84 Wash. 124 ( 1915 )

Holcomb, J.

This cause comes here upon an appeal by plaintiff from a judgment by the superior court of Thurston county, upon motion by defendant, respondent here, for judgment upon the pleadings, which motion was granted by the court below and the cause dismissed with prejudice, but later, upon application of the respondent, an order was granted allowing the restraining order to remain in force during the pendency of the appeal.

Appellant, holding licenses to write insurance as an agent in the state of Washington for two insurance companies, instituted the action in the superior court of Thurston county against the respondent as insurance commissioner, alleging, among other things, that the insurance commissioner was about to cancel its licenses; and thereupon obtained a temporary restraining order to prevent such action. The restraining order was kept in full force and effect up to the date of the entry of the judgment of dismissal referred to.

Thereafter*, by permission of the court, appellant filed its amended complaint, alléging, among other things, that it was a corporation of the state engaged in real estate, loan, and insurance business, at Seattle and Tacoma, had licenses issued by the insurance commissioner, and that the commissioner had threatened to cancel said licenses for alleged rebate. Among other things pleaded in the amended complaint, and which is admitted by the motion for judgment on the pleadings, is that the appellant in conducting its business would find applicants for loans, would take written applications, a copy of the form of which is attached to the amended complaint, which would give the character of the security, the amount of the loan, the terms and rate; and at the same time, if it could procure it, obtain an agreement by which the borrower would agree that the appellant should write the insurance during the term of the loan, and the insurance was always written at the regular board rates without any reduction or rebate; and that usually the borrower agreed to have the appellant write the insurance, but sometimes would not, and the loan might or might not be accepted; that the carrying of insurance became a valuable part of the security behind the loan, and that, if the appellant did not have the privilege of writing the insurance, its security was lessened and it would not be so well protected, and in all instances it did not cost the borrower any more or less, as he paid no extra premium and received no inducement for placing the insurance; and that it is a universal practice, carried on by loan agents of the state, to obtain the insurance in the manner aforesaid and for the single purpose of augmenting the security.

Respondent filed, his amended answer to the amended complaint, admitting, denying, and setting up an affirmative defense alleging that the appellant rebated, and that the contract for insurance made a rebate arrangement; and at the same time, served and filed a motion for judgment upon the pleadings, dismissing the action, and for such other and further relief as to the court seemed proper. The motion was based upon the records and files in the case. Appellant served and filed its reply, denying that its manner of conducting business as pleaded in the answer constituted rebating or any violation of the insurance code, and denied that it charged borrowers less commissions because of writing the insurance, etc.

The form of agreement which each applicant for a loan is requested and solicited to sign, before his application will be acted upon, contains the following language:

“Agreement by.............. as to expenses and compensation to Calvin Phillips & Co., in connection with, proposed loan of $........

“Seattle, Wash.,.........,19____

“Whereas, I have this day applied to and through Calvin Phillips & Co., for a loan of $.........to be secured by a first mortgage on property in King county, described as follows, to wit:

“I hereby agree, for myself, my heirs, executors, successors, or assigns, in consideration of the services rendered and to be rendered by the said Calvin Phillips & Co., to compensate them, if said loan is secured, by granting them the exclusive right as insurance agents to write, or have written, all the fire insurance carried on the buildings on the above described property during the life of said mortgage, and as additional compensation to pay a cash commission of..... per cent, of the amount of said loan, equal to $...........”

The insurance commissioner, acting under advice of the Attorney General, construed such transactions, as evidenced by the foregoing form of agreement, as rebating, under the terms and provisions of Laws of 1911, ch. 49, p. 195, § 33 (3 Rem. & Bal. Code, § 6059-33), which is as follows:

“No insurance company, by itself or any other party, and no licensed insurance agent, solicitor, or broker, personally or by any other party, shall offer, promise, allow, give, set off,/or pay, directly or indirectly, any rebate of, or part of, the premium payable on the policy, or on any policy, or agent’s commission thereon, or earnings, profit, dividends, or other benefit founded, arising, accruing or to accrue thereon, or therefrom, or any other valuable consideration or inducement to or for insurance, or ány risk in this state now or hereafter to be written, which is not specified in the policy contract of insurance; nor shall any such company, agent, solicitor, or broker, personally or otherwise offer, promise, give, sell, or purchase any stocks, bonds, securities, or property, or any dividends or profits accruing or to accrue thereon, or other thing of value whatsoever as inducement to insurance or in connection therewith which is not specified in the policy.....”

The Attorney General lays great stress upon the words in the said statute, “shall offer, promise, allow, give, set off, or pay, directly or indirectly, any rebate of, or part of, the premium payable on the policy, or on any policy or agent’s commission thereon, or earnings, profit, dividends, or other benefit founded, arising, accruing or to accrue thereon, or therefrom, or any other valuable consideration or inducement to or for insurance, . . . which is not specified in the policy contract of insurance;” and also lays great stress upon the language of the form of agreement used by the appellant in its transactions, “in consideration of the services rendered ... to compensate them, if said loan is secured, by granting them the exclusive right as insurance agents to write, or have written, all the fire insurance carried on the buildings,” etc. This, respondent contends, constitutes direct inducement and consideration from the appellant as an insurance agent to such borrowers, for the writing of fire insurance.

With the issue involved in this case, we find no authorities exactly pertinent or analogous. Respondent relies largely upon the holdings in the cases of Way v. Pacific Lumber & Timber Co., 74 Wash. 332, 133 Pac. 595, 49 L. R. A. (N. S.) 147, and Fergusom-Hendrix Co. v. Fidelity & Dep. Co., 79 Wash. 528, 140 Pac. 700. But in those cases we merely held, in- accordance with fundamental principles of law, that one cannot avoid his contractual obligations because of his own violation of statutes regulating the conduct of the business under which the contract was made. To the same effect are the decisions in Key v. National Life Ins. Co., 107 Iowa 446, 78 N. W. 68, and Interstate Life Assurance Co. v. Dalton, 165 Fed. 176, 23 L. R. A. (N. S.) 722.

With respect to the vigorous attack of appellant upon the policy of the law, we have only to say that the legislature deemed it advisable to enact this law regulating insurance and insurance companies and agents, and establishing a depart-ment of government for the supervision thereof. We will not speculate as to the policy thereof, or attempt to dictate or outline the general policy or course of conduct of said department. People v. Formosa, 131 N. Y. 478, 30 N. E. 492, 27 Am. St. 612. In this instance, however, we are of the opinion that private rights are threatened with undue invasion by the insurance commissioner, in excess of his authority, and that the appellant has no adequate remedy other than that invoked herein.

With respondent’s contention we cannot. agree. If the inducement and consideration flowing from the appellant in such transactions constitutes any inducement or favor for anything, it is for the granting of a loan or loans. As between the agent and the insured, it is rather a detriment than a rebate, benefit, favor, or inducement to the insured. There is no pretense that any premium other than the established or “board rates” of insurance is ever charged by appellant in its transactions.

The evident intent of the statute in question is to establish uniform rates of insurance throughout the state, and to maintain an absolute standard of insurance rates. The language of the statute is broad and the penalty for violation thereof is severe, viz., the cancellation of the license of the insurance agent who violates it. We shall not extend its provisions by judicial construction beyond its very evident scope and purpose. Forfeitures are not favored by the law, and, so far as we can see, there is no violation of the provisions of said statute by such transactions as those now under consideration.

The judgment of the lower court is reversed, and the cause remanded with instructions to grant the permanent injunction prayed for against respondent.

Morris, C. J., Chadwick, and Parker, JJ., concur.