Opinion
No. 23149
Decided December 9, 1931.
Superintendent of insurance — Action to take possession and conduct business of insurance company — Section 634-2, General Code, unconstitutional — Original jurisdiction conferred upon Supreme Court and Courts of Appeals — Sections 2 and 6, Article IV, Constitution — Writ of prohibition, against common pleas court and receiver, denied.
The provisions of Section 634-2, General Code, that purport to confer upon the Courts of Appeals and the Supreme Court original jurisdiction to hear and determine an action of the superintendent of insurance to take possession of the property and conduct the business of an insurance corporation, and for "such other relief as the nature of the case and the interests of the policyholders, creditors, stockholders and the public may require," are in conflict with Sections 2 and 6 of Article IV of the Constitution of Ohio and are, therefore, void.
IN PROHIBITION.
This is an action in prohibition, originating in this court. The relator, the Knights Templar Masonic Mutual Aid Association, is a mutual protective insurance association, incorporated under the laws of Ohio, with its principal place of business in Hamilton county, Ohio. The defendant, the Honorable Charles E. Peoples, is the duly elected, qualified and acting judge of the court of common pleas of Meigs county, Ohio. The defendant Fred W. Crow has been appointed by said court receiver of the relator.
The petition of one Jonas Erwin, filed in the court of common pleas of Meigs county, and upon the averments of which the receiver was appointed, is made a part of the petition of the relator, and avers that in 1878 he purchased a certificate of insurance from the relator, containing, among other provisions, a clause, "Eighth: The by-laws on the back hereof constitute a part of this certificate."
"By-Laws."Article 3d, Section 2d. — Amounts. Certificates of membership shall be issued in the amounts of one thousand, two thousand, three thousand, four thousand and five thousand dollars, at the choice of the applicant. No member shall hold more than one certificate. * * *"
"Article 3d, Section 4th. — Period and Rate Table.
"The members shall be divided into eight periods, according to age and pay, as follows:
"1st period, from 21 to 30, inclusive, $0.50 on each $1,000 on face of certificate.
"2nd period, from 31 to 35, inclusive, $0.60 on each $1,000 on face of certificate.
"3d period, from 36 to 40, inclusive, $0.65 on each $1,000 on face of certificate.
"4th period, from 41 to 45, inclusive, $0.80 on each $1,000 on face of certificate.
"5th period, from 46 to 50, inclusive, $0.95 on each $1,000 on face of certificate.
"6th period, from 51 to 55, inclusive, $1.30 on each $1,000 on face of certificate.
"7th period, from 56 to 60, inclusive, $1.50 on each $1,000 on face of certificate.
"8th period, from 61 and upwards, $2.00 on each $1,000 on face of certificate.
"As each member advances in age his assessments shall increase according to the above period of rates. All members reaching the age of sixty-one years shall be members of the 8th period."
"Article 4th, Section 1st. — Assessments.
"Upon the death of a member of the association, each holder of a certificate shall be assessed and pay to the secretary, a sum according to the period in which he stands at the time of such assessment, and according to the amount of his certificate. The period and rate table is drawn for $1,000 and shall be the unit in determining all other certificates."
"Article 4th, Section 3d. — Amount of Protection.
"Upon due notice and satisfactory proof of the death of a member of the association, the finance committee shall, within sixty days, pay the widow, children, or legal representatives of the deceased member, the sum of seventy-five per cent of the assessment collected and on hand at the time of his death; provided, however, said sum paid shall in no case exceed in amount, the face of the certificate held, or be more in proportion than would be paid to the holder of a $5,000 certificate if he were dead."
"Article 7th, Section 1st. — Permanent Fund.
"A permanent fund shall be raised in the manner following: First, from membership fees. Second, from that portion of the assessment not used for the payment of death losses; which fund shall be for the following purposes: First, to insure stability and perpetuity, and to provide for any contingencies that may arise. Second, to pay for medical examinations and all other expense of management. Whenever the trustee shall decide that the permanent fund is larger than required for the purposes herein named, death losses may be paid out of it; without making an assessment on the surviving members who have been members of the association for the full period of five years."
"No. 880."Knights Templars and Masonic Mutual Aid Ass'n.
"Name, Jonas Ervin "Masonic Body, Racine Lodge "No. 461, Place, Racine, Ohio.
"Amount -------------------------------------------- $1000 00 Initiation ........................................ 6 00 1st assessment .................................... 50 Total 1st paym't................................... 6 50
When assessm't changes:
Ages Inclusive Assessment Day Month Year
21 to 30 50 31 to 35 60 12th Jany. 1879 36 to 40 65 12th Jany. 1884 41 to 45 80 12th Jany. 1889 46 to 50 95 12th Jany. 1894 51 to 55 1.20 12th Jany. 1899 56 to 60 1.50 12th Jany. 1904 61 and upw'ds 2.00 12th Jany. 1909"
Such petition contains averments that he has been assessed in excess of the maximum sum of $2.00 on each one thousand dollars coverage, in violation of the contract; that the association has increased its limit of liability from $5,000 to $10,000 in violation of its contract, and "has improperly invested said funds and has violated said contract in various other respects;" that he has been denied an accounting; "that its assets June 30, 1931, were $748,477.00 with liabilities of $757,158.00 and that there has been such a decline both in assets and volume of business of defendant association that plaintiff avers and believes that said defendant association is in imminent danger of insolvency, * * * and that said funds and property are in danger of being materially injured or depleted * * * that the defendant association has filed with the Honorable Charles T. Warner, superintendent of insurance, state of Ohio, an application to amend its charter and by an actuarial report said plaintiff, being eighty-four years of age, would receive in lieu of said certificate a policy of insurance for less than fifty per cent (50%) of said Certificate No. 880 and that if said request is granted said plaintiff and all other certificate holders similarly situated would suffer irreparable loss and would have no adequate remedy at law."
The prayer is for an accounting, an injunction against the superintendent of insurance, for a receiver, and for all further relief, either in law or equity, to which plaintiff may be entitled.
The petition of the relator avers the appointment by the defendant judge of the receiver, the issuance of the writ of injunction against the superintendent of insurance, the issuance of a summons to the sheriff of Hamilton county, and its service there; avers that its office is in Hamilton county, and that all its property is there located and all its business is there transacted; that certificate No. 880 was there issued and collections thereon there made, and that it has transacted no business in Meigs county, and has no place of business, property, agent, officer or employee there; that its affairs are under the supervision of the superintendent of insurance of Ohio, "who is charged with the exclusive duty and authority of supervising the affairs of your relator and other insurance companies doing business in the state of Ohio, and of securing its assets to and for the benefit of its creditors and policyholders. All of the business of your relator has been transacted with the approval of the superintendent of insurance of Ohio, and your relator is and has been solvent, and has conducted its business in accordance with the laws of the state of Ohio, and in such manner as to protect the policyholders."
It avers that it "is proceeding to obtain the consents in writing of a majority of its members and has given the notice and held the meeting and otherwise taken the proceedings required by the provisions of Sections 9429 to 9429-2 inclusive of the General Code of Ohio to enable it to amend its articles of incorporation or charter and its constitution and by-laws in such manner as to permit it to transact the business of legal reserve or level premium life insurance on the mutual plan without capital stock, but without affecting existing contracts or policies of any member unless such member elects to take a legal reserve policy in lieu of his original certificate or certificates."
Relator further avers that "On July 8, 1931, said superintendent of insurance completed his examination of said association and in his report of said examination found that the association possessed admitted assets of $543,441.96, and that its liabilities were $223,334.07, and that said association had a surplus of $320,107.89. There has been no substantial change in the financial condition of said association since said report of examination."
Relator avers that said court of common pleas of Meigs county is without jurisdiction of the subject-matter of the cause of action, is without jurisdiction of the person of the relator, without jurisdiction to appoint a receiver for the relator, and without jurisdiction to issue an order of injunction against the superintendent of insurance; that it "has reason to, and does believe, and is in fear that said court and said judge thereof will proceed in said cause and make further orders and decrees and attempt to hold your relator, its officers, agents and employees, in contempt of the authority of said court and said judge," and that its business and property will be ruined or suffer irreparable injury, for which there is no adequate remedy at law, unless a writ of prohibition issue against said judge, and prays for a writ prohibiting said court and said receiver from all further proceedings in said cause.
Messrs. Riesenberg, Cohen Steltenpohl and Messrs. Vorys, Sater, Seymour Pease, for plaintiff.
Messrs. Ervin O'Donnell, for defendants.
This action, while it seeks to prohibit the court of common pleas of Meigs county from functioning in the cause there pending, is primarily to prevent the functioning of Fred W. Crow as receiver, or the functioning of any receiver who might be appointed by that court in that proceeding.
In so far as the record discloses, the relator has not availed itself of its right to question in the court of common pleas of Meigs county either the jurisdiction of that court over its person or over the subject-matter of the action. The principle is well established in Ohio that the extraordinary writ of prohibition may not be employed as a convenient short cut to a final determination of the rights of the litigants; that it may not be employed as a substitute for error, or for the available ordinary adequate remedies.
The court of common pleas is one of general jurisdiction, and is authorized to determine both its jurisdiction over the person and its jurisdiction over the subject-matter of the action, and this court will not presume, in advance of the question being there raised, that such court will determine the question other than in accordance with law. State, ex rel. Nolan, v. Clen Dening, 93 Ohio St. 264, 112 N.E. 1029; State, ex rel. Faber, Recr., v. Jones et al., Judges, 95 Ohio St. 357, 116 N.E. 456; State, ex rel. Hartford Life Ins. Co., v. Douds, 96 Ohio St. 604, 118 N.E. 1086; State, ex rel. Cleveland Telephone Co., v. Court of Common Pleas of Cuyahoga County, 98 Ohio St. 164, 120 N.E. 335.
We, therefore, without consideration, pass for the determination of the court of common pleas of Meigs county the question of the sufficiency of the petition filed in that court and its jurisdiction over both the person of the relator and the subject-matter of the action.
It is urged, however, that the provisions of Section 634-2, General Code, confer exclusive power upon the superintendent of insurance to institute actions of the character of the action pending in the Meigs county court of common pleas, and exclusive jurisdiction in the Court of Appeals and this court to entertain such actions. The court of common pleas having appointed a receiver, the question whether its jurisdiction in that respect has been curtailed by the provisions of that section is presented. The pertinent provisions of that section read:
"Whenever any such corporation (a) is insolvent; * * * or (e) is found, by the superintendent of insurance to be in such condition that its further transaction of business will be hazardous to its policy holders, or to its creditors, or to the public; * * * the superintendent may, the attorney general representing him, apply to the supreme court or any judge thereof or to the court of appeals of Franklin county or to the court of appeals of the county in which the principal office of such corporation is located for an order directing such corporation to show cause why the superintendent should not take possession of its property and conduct its business, and for such other relief as the nature of the case and the interests of its policy holders, creditors, stockholders or the public may require."
Were it not for the infirmities of that section, hereinafter discussed, this court might well reason that it was the purpose of the Legislature in the enactment thereof to provide a special proceeding for the taking over of the property of insurance corporations by the superintendent of insurance and the creation of a special jurisdiction in the Courts of Appeals and in the Supreme Court to hear and determine his application therefor; and that the special remedy so provided, being adequate for the advantage and benefit of the policyholders of the corporation, its creditors, and the public, and the jurisdiction conferred being new, special and ample, that it was the manifest intention of the Legislature to make both the remedy and the jurisdiction exclusive, as was held by this court in the case of State, ex rel. Bettman, Atty. Gen., v. Court of Common Pleas of Franklin County, ante, 269, 178 N.E. 258.
The Legislature, however, in the enactment of Section 634-2, undertook to confer upon the Court of Appeals and this court an original jurisdiction which the Constitution of Ohio has not conferred upon either court. It has been held by this court in numerous cases, beginning with Cincinnati Polyclinic v. Balch, 92 Ohio St. 415, 111 N.E. 159, and consistently ever since, that the jurisdiction of the Court of Appeals and of this court is derived wholly from the Constitution, and that the Legislature is without power to either limit or extend that jurisdiction.
This court had under consideration this identical section in the case of Hirsch v. Conn, Supt. of Ins., 115 Ohio St. 87, 152 N.E. 185, wherein it was held:
"The Court of Appeals has no authority under Section 634-2, General Code, to entertain an action to take possession of and conduct the business of an insurance company."
Upon that proposition the court was of one mind, the majority of the court, however, holding that the action there under consideration, while not labeled as a quo warranto proceeding, was in fact such, and therefore the Court of Appeals had jurisdiction thereof, conferred by the Constitution; the members not concurring being of opinion that the action was not one in quo warranto and therefore the Court of Appeals had no jurisdiction.
We are cited to no other statute, and know of none, which might be construed to limit the general equity jurisdiction of the court of common pleas over mutual benefit insurance corporations. There is a Section, 9487, General Code, limiting or attempting to limit the right of a member of a fraternal insurance society to invoke the jurisdiction of any court in his own behalf to appoint a receiver for such a society; but concededly that section does not apply to a corporation such as the plaintiff corporation.
Were we to hold that Section 634-2, General Code, must or ought to be construed as conferring exclusive power upon the superintendent of insurance to prosecute an action such as the one sought to be prohibited here, we would be compelled to further hold that the effect of that section is to deprive all courts of jurisdiction to entertain such an action, whether instituted by the superintendent of insurance or by the policyholder, since the power there attempted to be conferred upon the superintendent of insurance as a substitute for the right theretofore existing of a policyholder to invoke in his own behalf the general equity jurisdiction of the court of common pleas was confined to a power to apply for authority to take such corporation over in an original action in the Court of Appeals or in the Supreme Court. Neither of such courts has such original jurisdiction by the Constitution, and neither can receive jurisdiction by legislative enactment.
Section 634-2, General Code, being in violation of Sections 2 and 6 of Article IV of the Constitution of Ohio, the demurrer to the petition will be sustained and the writ denied.
Demurrer sustained and writ denied.
MARSHALL, C.J., MATTHIAS, DAY, ALLEN and KINKADE, JJ., concur.
JONES, J., not participating.