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Commercial Life Ins. Co. v. Wright

Supreme Court of Arizona

March 11, 1946

WRIGHT et al

Original proceeding in certiorari by the Commercial Life Insurance Company against Wilson T. Wright and others, as members of and constituting the Arizona Corporation Commission, to review the proceeding of the commission on an application of the Commercial Life Insurance Company for a permit to issue certain securities.

Order of the Arizona Corporation Commission set aside.

Moore, Romley & Roca, of Phoenix, for petitioner.

John L. Sullivan, Atty. Gen., and Harry O. Juliani, Asst. Atty. Gen., for respondents.

La Prade, Judge. Stanford, C. J., and Morgan, J., concur.


La Prade, Judge.

Page 944

[64 Ariz. 131] On the 15th day of November, 1945, a writ of certiorari was issued out of this court directed to the respondents requiring them to certify to this court a complete transcript of the records and proceedings before the Arizona Corporation Commission in its Docket 9724-B-2890, wherein Commercial Life Insurance Company appeared as an applicant for a permit to issue certain securities and was granted such permit, and wherein such permit was later amended and in part revoked, this to the end that the court might review the said proceedings and determine whether the said Arizona Corporation Commission had regularly pursued its lawful jurisdiction and authority. Prior to the return date of the writ, respondents filed a motion to quash the writ and a document designated as an answer, containing matter by way of justification. An answer constitutes a pleading unknown to the statutory proceeding of certiorari, and is not authorized or permitted. The purpose of the writ is to review the proceedings and acts of inferior tribunals, boards, or officers exercising judicial functions to determine whether the jurisdiction of such inferior tribunal, board, or officer has been exceeded, and there is no appeal. Section 28-101, A.C.A.1939; In re Farish, 18 Ariz. 298, 158 P. 845; Faulkner v. Board of Supervisors, 17 Ariz. 139, 149 P. 382. We have treated the answer as a brief in support of the motion to quash.

The grounds for the motion to quash are (1) that there is now pending in the Superior Court of Maricopa County an action between the parties hereto in which the identical questions involved herein are being litigated, (2) that petitioner has no right to file an original application for a writ of certiorari, he not having shown special circumstances which render it proper to sue in this court.

[64 Ariz. 132] A short synopsis of the petition for the writ discloses the following fact situation: Commercial Life Insurance Company, petitioner herein, is incorporated as a domestic life insurance company, and on April 10, 1945, secured from respondent Commission permission to issue and sell its capital stock to the extent of $ 100,000 in Founders' Shares. The permission was conditioned upon the stock's being sold in accordance with a certain trust agreement and the provisions of the trust agreement were approved by the Commission

Each trust agreement is a contract between three corporations and one individual, and by its execution the various parties made substantially these agreements: (1) The individual signer, designated

Page 945

as "trustor," assigns to The Phoenix Savings Bank and Trust Company (an Arizona banking association) such future dividends as may become payable to him by reason of his ownership of a benefit certificate issued by Commercial Benefit Insurance Company (an Arizona benefit insurance corporation) and agrees that such dividends may be used for the eventual purchase, in his name, of petitioner's capital stock; (2) Commercial Benefit consents to the assignment and agrees to pay the assigned dividends, when payable, to the bank; (3) the bank consents to act as trustee, to hold all funds so deposited in a trust fund, and to deliver the fund to petitioner when it equals $ 100,000; (4) petitioner agrees upon receipt of the $ 100,000 to issue shares of its capital stock to trustor in an amount equal to his share in the fund.

Following respondents' approval of the foregoing plan of stock issuance, and in accordance with the permission of April 10, 1945, petitioner secured the execution of numerous counterparts of the original trust agreement by policyholders in Commercial Benefit throughout Arizona.

On September 10, 1945, the Attorney General of Arizona transmitted to respondent's Director of Insurance an opinion in writing wherein he characterized the trust agreement as forbidden by statute, in derogation of law, ultra vires, void, and invalid; and suggested that the Commission was authorized to order a refund to the trustors of any sums which might have been deposited with the bank under the terms of the agreement.

Acting in accordance with this opinion and basing their order solely on such opinion recited therein in full, respondents issued their Decision No. 15809 on September 22, 1945, and in that decision amended and revoked the permission of April 10, 1945, to the extent that the April order approved the trust agreement, and further required the bank, the benefit company (neither of which was a party to the original proceedings before the Corporation Commission) and petitioner to refund to the trustors any sums which might have theretofore been placed in trust with the bank.

The specific objections of the Attorney General which prompted the revocation [64 Ariz. 133] were: (1) That by the agreement the benefit company agrees with petitioner to deliver to trustee the surplus dividends from its mortuary fund. (2) That by the agreement the benefit company was attempting to deviate its mortuary fund to a purpose not only unauthorized but actually forbidden, relying upon the provisions contained in sections 61-1009 and 61-1010. The latter section defines the powers of the benefit corporation. Section 61-1009 provides for the creation of a mortuary fund, its use, and disposition. (3) That the trust agreement was signed only by the corporate parties and not by the policyholders of the benefit company. (4) That the trust agreement was in derogation of the Benefit Insurance Corporation Act of 1943, Code 1939, § 61-1001 et seq., and as to the benefit company was ultra vires and void. (5) That the trust agreement was void as to the Commercial Life because the statute (section 61-324, A.C.A.1939) prohibits an insurance company from including in its capital assets any property of another insurance company.

The petitioner further alleged that there was no review from the order of the Commission amending and revoking in part the original permit; that dividends from the benefit company would become due and payable shortly after January 1, 1946, and by the terms of the trust agreement and assignments would be payable to the trustee, and, that if the order of revocation was not set aside, it would suffer irreparable injury thereby.

The so-called dividends referred to in the trust agreement, if made by the benefit company, were really refunds of premiums paid and made under the authority of the section 61-1009, supra, and as we shall hereafter point out subject to disposition by the owner of the refund.

The petitioner was incorporated as a life insurance company in June, 1944, under the provisions of Charter 61, A.C.A.1939, and was subject to the regulations provided in Article 3 of said chapter. It had not qualified to do business for the reason that it had not complied with the provisions of section 61-202, which require that no stock insurance company shall make life insurance in this state without having a capital stock fully paid up of at least $ 100,000. It was the evident intent and purpose of the company to secure this $ 100,000 by the sale of its stock to holders of certificates in the benefit company. The benefit company was

Page 946

organized under the provisions of Article 10 of Chapter 61. Under section 61-1009 of said chapter, a mortuary fund is created from the premiums paid by the certificate holders, which fund must be used for a special purpose ...

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