169 S.W.2d 1 | Ky. Ct. App. | 1943
Affirming.
The appellant and defendant below, Hon. Sherman *421 Goodpaster, Director of Insurance of Kentucky (hereinafter referred to as the Director), promulgated two rules applicable to fire insurance. (1) That no resident insurance agent's license would be issued to an employee of a finance company or of a building and loan company; (2) that no corporation, a majority of whose stock is owned by non-residents, would be issued such license. The Southern Insurance Agency, a Kentucky corporation, brought this declaratory judgment action in the Franklin Circuit Court under Section 639a — 1 et seq., of the Civil Code of Practice to determine whether or not the Director had authority to promulgate these two rules. The chancellor adjudged that he had no such authority and the Director appeals.
The case was tried on a stipulation which shows these facts. The Southern Commercial Corporation (hereinafter referred to as Commercial) existed under the laws of Indiana with authority to engage in what is commonly known as automobile financing, to act as an insurance agent, and it was duly licensed as such agent in Indiana. The company had qualified to do business in Kentucky. Its principal place of business in this State was a Paducah, and J.P. Thomas, an employee of Commercial, held a resident insurance agent's license to write insurance in Kentucky for the Fidelity Phoenix Fire Insurance Company. The purchaser of a car as a prerequisite of obtaining a loan was required to insure the car against loss by fire and theft in favor of the seller as its interest appeared; and if requested by the seller, to purchase insurance against collision. Practically all the insurance Thomas wrote was on cars financed by Commercial and he divided his commissions with that company which paid him a salary to cover his commissions. The cars were financed under conditional sale agreements providing that the title remained in the seller until the purchase price was satisfied, and the notes and sale agreements were assigned to Commercial without recourse, which in turn assigned same to the First National Bank of Evansville, Ind.
The Director complains that Thomas was violating the insurance agency laws of Kentucky, Sections 298.190, 298.230 KRS. Thomas and Commercial denied their arrangement infringed upon the law, but to obviate the complaint a Kentucky corporation, Southern Insurance Agency (hereinafter referred to as Southern), was formed *422 in November 1940, in which Thomas became a stockholder and held the office of assistant secretary. Thomas was a licensed resident insurance agent and as such conducted and carried on Southern's business of resident insurance agent as is provided in Section 298.190 KRS. The majority of the stock in Southern was held by nonresidents and by the same persons who owned the stock of Commercial.
On June 7, 1940, the Director published an order that no resident insurance agent's license could be held by employees of finance companies or of building and loan associations. On September 19, 1940, he published an order to the effect that such license would be refused a domestic corporation, the majority of whose capital is owned or controlled by a foreign corporation or by residents of another state. On January 6, 1941, the Director revoked a resident agent's license issued Thomas on December 2, 1940, for a period of one year on the ground that Southern could not engage in the business of a resident insurance agent in Kentucky because a majority of its stock was owned by non-residents. This action was brought to test the authority of the Director to make such orders, and the chancellor held he had no such authority.
It is urged by the Director: (1) That on account of certain abuses or illegal acts of some automobile finance companies engaged in the insurance agency business, he was authorized under the police power to make the two rules above mentioned to divorce the finance business from that of insurance agencies; (2) that the receipt of dividends by the stockholders of Southern was a rebate under Section 298.230 KRS; (3) that Southern was formed as a subterfuge to circumvent the two rules promulgated.
Section 298.190 KRS authorizes a domestic corporation to engage in the business of insurance agent and Sections 298.200 and 298.220 authorizes the Director to prescribe rules and regulations as therein mentioned in respect to the business, and to suspend or revoke a license for certain designated violations of the insurance laws therein enumerated. Neither of these sections confer upon the Director authority to say that an employee of a finance company or of a building and loan association cannot engage in the business of an insurance agent, or that a corporation cannot do so where a majority of *423
its stock is owned by non-residents. The Director holds a statutory administrative office and the only authority he possesses is that delegated to him by the Legislature through the statute under which he acts. Allin v. American Indemnity Co.,
We are not in accord with appellant's argument that Thomas in turning over all commissions to Southern and accepting a salary in lieu thereof, or that the receipt of dividends by the stockholders of Southern, is rebating within the meaning of and prohibited by Section 298.230 KRS. This very question has been determined adversely to appellant's contention in Rogers v. Ramey,
Appellant insists that Southern was formed by the stockholders of Commercial merely as a subterfuge and to circumvent Section 298.190 KRS and allow Commercial to obtain a resident agent's license through Southern. We are asked to ignore what appellant terms the corporate fiction of Southern and to draw aside its veil as a corporate entity and to hold that it is but Commercial clothed in different raiment, citing Louisville N. R. Co. v. Carter,
The instant case is clearly distinguishable from State v. Safford,
The judgment is affirmed.