*1 Bank. June A. No. 23261. 1955.] [L. LIFE INSURANCE COMPANY
THE MUTUAL PACIFIC al., (a Corporation) Appellants, et CALIFORNIA
OF Insurance Commis McCONNELL,
v. F. BRITTON Respondents.
sioner, etc., al., et *4 Ray Robinson,
Joseph Lewinson, Belcher, L. B. C. Frank Henry Low and Faulkener, Wiseman, & W.
Melvin, Sheehan Appellants.
William B. Boone for Ray Boone, Amici
C. William B. as Curiae Robinson and
on of Appellants. behalf
O'Melveny Fussell, Mitchell, & Paul Homer I. Myers, James
E. Doherty, Guy Cross, George Gose, Knupp B. P. Frank
Peery Respondents. Price for
Lloyd Heller, W. Dinkelspiel Ehrman, White & Mc
Auliffe, Respondents. as Amici Curiae behalf
GIBSON, C. J. The Pacific Life Mutual Insurance Com
pany (hereinafter of California referred to as the “old
company”) and certain of brought its stockholders this man proceeding
damus superior court to review action
of the Insurance approving Commissioner in mu corporation,
tualization a second Pacific Mutual Life Company (hereinafter
Insurance called the “new company”), organized by had been part commissioner as
the rehabilitation of company. the old upheld The court action of the commissioner, plaintiffs appealed have from judgment.
In 1936 the old company was in a hazardous and insolvent
condition meaning within the Code, the Insurance and its and assets were taken over
business the Insurance Commiss
ioner,* as (Ins. authorized Code, §§1011, 1013.) statute.
Pursuant code, section 1043 of the agree rehabilitation
ment was entered into new company between the and Com Carpenter,
missioner company, conservator the old
whereby most its assets were transferred to the new com exchange
pany in for all company’s capital new stock. stock was to held commissioner as conservator
for creditors, policyholders benefit of the and stockholders company. old substantially assumed commissioners, Goodcell, Caminetti, *Six Carpenter, successive Messrs.
Garrison, Downey Maloney, passed upon relating have matters insolvency company. of the old *5 obligations company, including of old a limited
all the the respect'to
obligation noncancellable accident health with policies”), “non-can
policies (referred to herein as for of
agreed up special set a fund restoration benefits to policies. of
holders those hearing, superior court 1936, a the
In December after agreement and authorized the
approved the rehabilitation obligations required his perform all the
commissioner to Carpenter in v. Mut.
part. This order ivas affirmed Pacific (Affd. 761], in Neblett Co., L. Cal.2d P.2d Ins. 307 [74 182].) 83 L.Ed. Carpenter,
v.
tion of the old Carpenter in v. Mut. liquidator. upheld
as It Pacific 637], In commis Co., P.2d 1938 the L. Ins. 13 Cal.2d company five trustees the the stock of new sioner transferred vote it legal power the with given stock
who were title to agree the rehabilitation purposes
in with the of accordance approving transfer was affirmed Cam
ment. The order the L. Mut. Ins.
inetti 908]. agreement set forth the method which rehabilitation company
a of could be formu- mutualization the new per participating cent life provided It that 10
lated.
policyholders request the to create an could new consisting president of Life
appointing committee America, president of
Insurance Association of Stanford University
University provost at California Angeles. appointing committee was directed select
Los composed persons skilled price determination committee price If valuation.
in matters of insurance voluntary mutualiza- committee concluded that
determination accomplished, propose a practicably could be it was to
tion laws of this
plan of in accordance agreement By commissioner, the terms
state. company,
sole consented advance shareholder to be formulated.
to the of mutualization consisting appointed, price
A determination committee was McAndlcss, president of Lincoln National Life
of Alva J. Wayne, Horace Bass- Company Indiana; Fort R.
Insurance Metropolitan actuary
ford, president and chief vice Ray Murphy, York; vice Company Insurance of New D.
Life
president actuary Equitable Life Assurance and chief partner
Society York; Hettinger, Albert of New J. engaged a firm investment Company, Freres and
Lazard years study
banking. proposed the committee After three plan mutualization, provides that, occur- buy conditions,
rence of the new shall all certain plus from capital $3,000,000, its own stock interest price augmented 31, 1948,
December should policies completed under non-can
restoration benefits
before 1973. *6 proposed plan adopted by
The of mutualization the company May 5, September of
directors the new on 1950. On
22, Downey hearing, approved after a Commissioner plan, finding equitable
the that it be fair and would
operation, approved by policyholders and thereafter it was the
of company. the new proceeding This in mandamus was brought
then to review action of commissioner, the the
the trial court concluded there evidence was substantial support findings
to juris- his he had exceeded his
diction or abused approving plan. his discretion in attack judgment upon grounds, and,
Plaintiffs numerous
although many may disposed by their contentions be
application principles judicata, res we believe problems may clearly presented by be more discussing first propriety points determination the various with- regard binding
out prior adjudications. to the effect problem
The first which we must consider is whether the
proper statutes were followed in approval the formulation and plan. contemplated by mutualization As rehabilita agreement,
tion steps all adoption connection with the plan pursuant were taken seq. to sections 11525 et Code,
the Insurance voluntary which relate to mutualization
of a solvent insurer.* applicable Plaintiffs assert that
statutes for mutualization the new are sections seq., govern et which involuntary of an mutualization †
insolvent insurer. procedure essential differences in provides: *Section 11525 of the Insurance Code “A solvent domestic incorporated having paid-in capital represented by outstanding insurer capital issuing, basis, shares of policies stock and on a reserve nonassessable disability insurance, may of life insurance or of both life and incorporated insurer, convert itself into an mutual life or life and dis ability insurer, issuing policies nonassessable on a basis. reserve To that may provide carry plan acquisition end it standing out a for the of the out capital policyholders, shares of its stock for the benefit of its any policyholders, by complying require class or classes of its with the chapter.”
ments of this provisions relating procedure Sections 11526-11533 contain detailed adoption and execution of the of mutualization. †Section provides part: 1043 of the Insurance Code “In proceeding .article, commissioner, under as conservator or as relating voluntary
are that under the sections adopted directors,
of a solvent approval commissioner, and the
subject the stockholders proceedings necessary; whereas under the no court involuntary mutualization of a seized insurer
provisions by the commissioner as conservator plan is formulated directors, and it of the stockholders must
without consent court. approved
be nondelinquent, is solvent and
The new why mutualized under reason it should be is no sound
there com relating insolvent insurers.
the statutes corporation in create the new order power to
missioner had insurer. Section business of the seized preserve rehabilitation commissioner to enter into authorizes the may express no limitation what agreements, contains provides that the enumera them, and section
included shall not be construed of the commissioner powers
tion right do such upon him or his other as a limitation handling necessary in connection with the he deem acts as * company.* When sal of an insolvent affairs greatest possible of a insurer the
vaging business seized given and other interested to creditors
protection should evidently commissioner present instance the in the
parties, and *7 accomplished be objective could best that concluded company divorced as far as of a new
through formation the charge in were of those who control possible from the financial difficulties. experienced company when it old
the entity, separate and distinct a company is The new ceased to be the it transferred business was
and when the subject court, approval subject said liquidator, may, the necessary the business of may or reinsure mutualize such liens agreements." words “such person, rehabilitation into such or enter in sections as referred person" insurer an insolvent include insolvency delinquency. dealing seq. with Insurance Code of the et any of an provides: after the issuance “If at time Section appear that to the commissioner it shall 1011 ... under section order by the mutualization attained purposes can be best of section
the plan may for the insurer, formulate the commissioner life of such seq. forth the set 1046 et insurer." Section such mutualization necessary procedural steps. part: provides in “The enumera Code the Insurance 1037 of *Section authority duties, powers article, of the com tion, of the in this not be construed as a proceedings this article shall under in missioner commissioner, in manner shall it exclude nor limitation specifically acts not herein perform such other right and to do his may necessary provided for, deem enumerated, which he otherwise or purpose accomplishment such in of the expedient or aid for ’ ’ proceedings. became the business company and old
business Co., 83 Mut. L. Ins. company. In Garrison new identity was held that the 893], 1, 9-10 Cal.App.2d utterly from that of old distinct company “is new ‘‘ ’' fairly said that it is continu cannot be company, that it company “is a company,” and that the new
ance of old company’s being after old entity came into
separate that new ...” The fact
insolvency was declared. agent or as an may purposes for some have served destroy does not its
instrumentality commissioner con company. Accordingly, as
identity separate aas agreement, applicable stat
templated by the rehabilitation new
utory for of the provisions mutualization voluntary govern seq., 11525 et those found in section nondelinquent insurers.
mutualization solvent improper it was
Plaintiffs nevertheless contend for procedure up set in the mutualization
to follow the code they assert, commissioner company because,
of a solvent conflicting doing capacity so was forced to act a dual prescribes method to be 11526, which
interests. Section mutualizing insurer, provides that
followed in a solvent vote of the Approved (b) shall be: “. . . majority outstanding shares at a
holders of at least purpose,
special meeting of called shareholders shareholders, (c) of such Submitted the written consent writing.” Com approved him
to the commissioner and of the stock Carpenter
missioner as the sole holder plan of mutualiza in advance to the consented holding a
tion, Downey approved it after and Commissioner equitable
hearing fair and if the would be to ascertain responsibilities of operation. claim that Plaintiffs from (c) are different commissioner under subdivision (b). Even his under subdivision conflict with duties circumstances,
if some might there a conflict under such adopt statutory improper
it would follow that it was of a solvent
procedure com set forth legislative solvent
pany. The scheme for the mutualization be defeated
nondelinquent in some instances insurers would *8 urged reasons disqualified
if for the the commissioner were Legislature
by plaintiffs, and it must be assumed required pass upon might be
realized that the commissioner conservator, acting as plan he, in case the fairness where on behalf previously
had consented to mutualization admin- of an
stockholders. In numerous cases where the action
724 necessary prevent statutory was
istrative officer defeat of the participation although his has been
scheme, upheld,
grounds disqualification for were much more serious than those (For example, Thompson City Long here. raised see v. 235, 649]; 41 Cal.2d 243-244 v.
Beach, P.2d Caminetti [259 Co., 344, Mut. L. Ins. Cal.2d 365-366 P.2d [139
Pacific v. ; Curd, 489, Federal Const. Co. 179 Cal. 493-495 908] [177 1202]; Cal.App.2d v. 469, Wolff, P. A.L.R. Scannell 536]; Homan, Cal.App.2d P.2d Nider v.
489, 492-493 [195
11, 13 136].) Carpenter P.2d The fact that Commissioner [89
gave plan behalf of the stockholders to a advance consent Downey disqualify Commissioner
of mutualization did not of the passing upon
from the fairness promulgated.
which was rejecting plaintiffs’
An reason alternative claim that it improper procedure follow the
was set forth in sections seq. in
11525 et the mutualization the new company is validity of agreement, the rehabilitation pro which voluntary mutualization, judicata.
vided now res A copy agreement was attached to and made part sought petition approval which agreement.
petition pursuant was filed to section 1043, provides agreements entered
that rehabilitation into the commis subject approval the superior
sioner are to the court. The agreement
validity provisions all the of the put petition
issue and determined the court. The order approved agreement 1936, 4, December “and each and thereof,
all of the terms and conditions and the therein ’’ embodied, reciting parties all interested had given been opportunity question heard
a reasonable on “the feasibility, justice, equity, propriety”
fairness,
agreement plan. parties All and the were enjoined forever any complaint making respect
from agreement to the any provisions thereof. This order was affirmed in Car Co., L. Ins.
penter v. Mut. Cal.2d 307 P.2d [74 761]. Pacific Carpenter (See Mut. L. Ins Co., also 13 Cal.2d Pacific ; P.2d Caminetti v. 314-316 Mut. L. Ins. 637] 908].) 351-352 different causes of action were
While involved in leading the one
present proceeding approv to the order parties
ing agreement, same, rehabilitation were the though even is settled that causes action be prior
different, the determination an issue is conclusive subsequent parties
in a suit between the same to that issue
725 urged been every might have sustain matter which Shore, 677, v. 43 Cal.2d (Shore or defeat its determination. 841, 28 843 400]; Krier, Krier v. Cal.2d 682 P.2d [172 [277 P.2d Allen, 829, v. 26 831 681];
P.2d De Hart Cal.2d [161 328, 1045]; Keet, 15 Cal.2d 334 ; Estate [100
453] P.2d of 652, seq. Sutphin Speik, 195, 15 201 P.2d v. Cal.2d et [99 354, Trustees, 1 Cal.2d 497];
101 P.2d v. Board Caminetti Assn., 201 Agri. 1021]; v. District 356 P.2d Sixth Price [34 language 502, seq. 387].) Cal. 510 P. Inconsistent et [258 Appeal opinions District Court found certain 50, 59 Green, Cal.App.2d 66 disapproved. (Green
must v. Cal.App.2d 94, 97 Babcock, 63 679]; P.2d Babcock v. [151 Cal.App. 22 McLaughlin, ; P.2d America v. Bank [146 279] basic 411, 554].) 2d 291, 417 P.2d 72 P.2d [71 agreement
issue was submitted before the court when the
approval provisions, propriety was the of each every matter as to
the determination of issue is conclusive might urged deter
which have been or defeat its to sustain
mination. It is contended approving that the order the rehabilitation agreement may collaterally upon attacked theory procedure
the mutualization provided for in agreement wrong* statutory
followed the provisions and that therefore
the order is For void. the purpose passing ques-
tion we assume, contrary shall to what just we have decided, wrong statutes were used in the company. the new general It is the judgment rule that a final or order judicata
is res though even contrary to statute where the jurisdiction has court in the sense, e., fundamental i.
subject parties. matter and the In the consideration problems arising kept this field it should be in mind is a there difference between jurisdiction lack of in the sense, ordinarily
fundamental which is essential for collateral meaning
attack, the broader juris the term “lack determining
diction” when used availability of prohibi
tion or certiorari to review an order judgment. Some cases
involving collateral attack unfortunately have recog failed to (For
nize this distinction. discussion of distinction, see
Abelleira v. District Appeal, Court 17 280, Cal.2d 287-291 942, P.2d 132 715]; A.L.R. Tide Water Assoc. Co. [109 Oil Superior
v. Court, 43 815, 35].) [279 In requirements some instances may a statute subject relate matter jurisdiction, disregard of the judgment subject void and render a to collateral
statute Court, example, Superior (See, attack. Grannis V. 23]; Rogers 891, Am.St.Rep. 254-255 P. 245, Cal. cf. Am.St.Rep. Cady, 291-292 P. Cal. 100] provision].) present ease, how
[constitutional
ever, approved the rehabilita it is clear that the court subject agreement jurisdiction had matter
tion exception, parties, and, unless the case comes within some ground that the court
collateral be based attack cannot *10 wrong statute. proceed
authorized under the here are analogous problem involved
Closely to the although judicata, holding probate are res cases that decrees contrary are
they pursuant to wills which direct distribution sitting like a court statute, probate, in since the court duty to upon agreement, under a passing a rehabilitation is (Estate validity of it.
determine the instrument before v. ; Crew Loring, seq. 29 P.2d 423, Cal.2d 427 et 524] [175 Gardiner, seq. 38]; Estate 139, 119 et P. Pratt, Cal. 147 [51 ; v. McGavin seq. P.2d Cal.App.2d 559,
45 562 et 643] [114 seq. 168, 170 et Soc., Cal.App. 34 San Francisco P.O.A. [167 holding Similarly analogous cases that 182].)
P. as to the judicata res settling a is
an order trustee’s account which certificates
propriety purchase of investment Security-First (Willson v. contrary to were issued statute. Crane, 800]; Estate Bank, 21 705 P.2d Nat. Cal.2d [134 Donohue, Fergodo v. Cal.App.2d 940]; 93 P.2d 73 [165 cf. 66 Cal. Rowe, 819].) Cal.App. 40 Estate 670 P. [181 eases contrary to the App.2d 765], 594 which is P.2d [152 above, disapproved.
cited is judicata principle applied
The of res has also been holding judgments enforcing
as a that basis contracts illegality subsequent litigation. in
are a bar to defense 832];
(Andrews Reidy, v. 366 P.2d De v. 7 Cal.2d Hart [60 639, 273], P.2d in Cal.App.2d approved 49 646
Allen, [122 829, 830-831 Allen, ;
De v. 26 Cal.2d P.2d Hart [161 453] Short, Cal.App. 210, 1111].) v. 215 106 P. Short [288
cf. applied in which doctrine is San Another instance
Diego
Young,
133], prior reduced the where the impliedly Diego contrary case over to statute. San
tion 538], P. Anthony Janssen, v. 183 329
ruled Cal. [191 Cemetery Assn., Cal.App. 60
Tonningsen v. Odd Fellows' judgment, 710], has also been held that a 568 P. It [213 based contrary because it was
which was to the Constitution
727 invalid, judicata res held was nevertheless a later statute suit, objections in to the subsequent stating the court prior proceeding. in the have been
statute should raised 308
(Chicot County Drainage Bank, Dist. v. Baxter State 329].) 317, 319-320, 84 371, 376,
U.S. 378 S.Ct. L.Ed. [60 quoted Elba approval in Mueller v. Chicot case is 188, 961], Oil 205-206 P.2d was cited Co., Cal.2d [130 463-464, Army
in Municipal Court, Rescue v. Cal.2d P.2d 8]. recognized general exceptions There are some rule to the attack will be where there is funda collateral allowed though judgment jurisdiction contrary
mental even example, judgment may collaterally
statute. For present
attacked where unusual circumstances were
prevented an more appropriate (See earlier and attack.
Witkin, (1954), 411-412.) California Procedure In Burtnett King, 333], A.L.R.2d permitted against
collateral attack was a default divorce community
decree which awarded all the property to the
plaintiff in the of prayer absence complaint, therefor
contrary provision section 580 the Code of Civil
Procedure that relief a default case cannot exceed that complaint.
demanded The defendant in the divorce warning
action no had notice the property would by a judgment, opinion affected default points out
that the decision trap would sanction if a it held that his
property rights disposed had been of since he properly would
have assumed from the complaint rights that his prop to the erty.were litigated not to be at (33 that time. p. Cal.2d at 811.) present readily The case is distinguishable, since there nothing prevent questions
was to the which are raised with
regard validity to the of the rehabilitation agreement from litigated
being proceedings in the which led to the order
approving agreement. the
Proceedings prohibit to or annul judgments of con
tempt injunctions for violation of equitable and other orders contrary made to statute exception constitute another general (Harlan the Superior rule. v. Court, 94 Cal.App.2d
902, ; 904-905 P.2d Superior Hunter v. Court, [211 942]
Cal.App.2d ; P.2d Fortenbury Superior v. [97 492] cf.
Court, 16 Cal.2d 407-408 [violation 411] Constitution].) The decisions do not use the term, but might attack such eases be considered to be collateral, special category in a apparently fall proceedings
and the they penal in nature.
because foregoing that, follows even
Prom discussion it agreement order
if the rehabilitation and the we assume that of the new
approving authorized mutualization it judicata. wrong statutes, order is nevertheless res
under the compliance was sufficient problem is whether there
The next requirements voluntary statutory mutualization
with the seq. provide 11525 et Sections solvent insurers. by adopted the directors and
plan of mutualization shall shareholders, policy- commissioner and the by
approved the actions taken to meet contend that
holders. Plaintiffs respects defective and requirements were certain
these
unauthorized. mutualiza shareholders approval
The by agreement Commis given the rehabilitation
tion was company. of the new As Carpenter sole stockholder
sioner provided for agreement the formulation seen, the
we have price committee, determination plan of mutualization
a acting for commissioner, claim that plaintiffs authority to company, new was without
shareholders of the plan. In the absence consent to such
give advance of a statutory provision contrary, the stockholders contract consent to a future company can
solvent Ry. Hell (cf. Co. voluntary Market St. 225]), no sound reason 586-587 P. 109 Cal.
man, improper merely agreement is because why such an
appears commissioner as conservator shares are held apparently concluded that The commissioner insurer. seized destroyed could not be plan for mutualization necessary was shareholders or nonaction action future prospective policy inducing former and both means
as a permit and thus with the to deal
holders com powers vested in the existence.
continued sufficiently 1043 are broad 1037 and by sections
missioner give consent stockholder, advance him, as sole
to authorize validity of all Moreover, the plan of mutualization. including provi agreement, of the rehabilitation portions judicata. consent, is res for advance
sion plan, adopted but the mutualization directors they ineffective because action taken claimed assertedly *12 enable them information to obtain sufficient
did not They desirability plan. of the the evaluate properly com- price report the determination of the
had the benefit experts, including opinions of actuaries and
mittee and the prac- and seems obvious company, that,
officers of the it ordinarily on the advice matter,
tical directors must act persons expert have knowl-
corporate officers and other who Sterling, Corporation &
edge. (See Ballantine California p. 110.) (1949),
Laws by adopted plan
After directors the as formulated price Downey committee, Commissioner determination hearing nearly
held a weeks. and which lasted three Oral
documentary received, parties evidence and was all interested opportunity participate. ap an
had The commissioner
proved plan finding rights after interests company, policyholders
of the new its were shareholders
protected equitable would fair operation. findings Plaintiffs contend that are not
supported pro evidence and that there was lack of process hearing. passing
cedural due at these
contentions, give shall we first plaintiffs’ consideration to
claim court, reviewing that the trial the action of the com
missioner, have should held a trial de novo.
approval of plan by the mutualization the commissioner did any deprivation
not property involve rights or vested
rights; permit was essence a authorizing it license purchase
neAV its own stock. Under these circum
stances superior the function court towas determine
whether the taken arbitrary action commissioner an constituted abuse of discretion, upholding and in
action of the commissioner, properly refused to conduct a (Southern trial novo. Jockey de Club, v. Inc. Calif. California Racing Board, etc. 167, Cal.2d ; 174-175 P.2d 1] [223
McDonough Goodcell, 13
741,
746-749
Cal.2d
P.2d
before the support approval commissioner does his
plan. price determination committee consisted of men
highly skilled in company valuation, matters of insurance they were assisted in the formulation
Joseph Christman, actuary Metropolitan associate Life Company Society
Insurance York, New two Fellows of the
of Actuaries, supervisory and numerous trained and clerical
employees. Experts price testified that fixed for the
purchase relating fair, provisions stock was *13 necessary for were the payment and manner of
to the time proposed the company, that stability of new safety the persons of rights all protection to the gave regard and due in be fair its company and would interested
operation.
Plaintiffs’ contention that there of pro was denial process is based on due their claim that commis
cedural accepted price the conclusions determination
sioner having him without before all the on
committee facts which were based and that the committee
those conclusions itself actuary reviewing on statistics furnished its without
relied price Two supporting data. members of the deter
all the testified detail as to how the committee
mination committee regard determinations, actuary and the testified
arrived at report Thus
ing his was introduced evidence. two responsible of were
of four members the committee who actuary procured who most report,
for its as well as the for committee, available cross- relied on
the data were experts in seen, have were men, These as we
examination. fields, the fact insurance and investment persons who assisted of the committee and the
other members at immaterial, actuary as witnesses were not called sought plaintiffs to showing
least in the absence City Alham testimony. (City Pasadena
obtain their hearing an 17].) 908, 919 At the bra, 33 Cal.2d testimony neces documents and offer made furnish the was No work.
sary explain every committee’s detail refused, and request made for data
claim is they if failed complaint have no
plaintiffs valid basis request.
to make such a judgment is affirmed. J., (Fred
Shenk, Spence, J., B.), pro and Wood tem.,* J.
concurred.
TRAYNOR, I dissent. J.
Although Legislature provided statutory has detailed
provisions for the mutualization of the business of an insolvent Code, seq.), majority opinion (Ins.
insurer et holds § provisions may completely be effect that these nullified agreement
by the execution of a rehabilitation under section agreement Code, provides if the Insurance such voluntary new insurer created for mutualization
* Assigned of Judicial Chairman Council. purpose carrying business the old. executing powers in
commissioner has broad rehabilitation may be desirable for
agreements, proper and it both corporate entity salvage
him of a new to make use follow, however,
business of not an insolvent insurer. It does agreement is product
that if the end a rehabilitation insurer,
be the mutualization business an insolvent statutory provisions such mutualization respect with only ignored. they may To renders hold that involuntary provisions respect
superfluous right deprives parties their but the interested *14 protection scrutiny mutualization. plan
to the of the court
(See 1051.) Ins. Code, § importance the shareholders the old having independently the court pass the fairness of plan
the of mutualization is by demonstrated the facts of this clearly
case. The trial court indicated that had the decision his, plan
been the would have not been approved; if the independent shareholders were to his entitled judgment, their
rights prejudiced by have been his failure to exercise it.
This is involving only not one case the mutualization of a
solvent if insurer, were, since the shareholders would have power
the to protect their by interests withholding their plan (Ins. consent to the mutualization. Code, 11526, § (b).) fact,
subd. In the business an insolvent insurer being pursuant
is mutualized to a agreement rehabilitation deprived
that has the of the shareholders old power they
the veto have, otherwise would and under the
holding opinion majority they of the must look to the com-
missioner rather than to protection the court for the of their (Ins.
interests. Code, §§11526, (c), 11527.) subd. Although Legislature recognized by approval that the commissioner is when all of parties sufficient posi- the interested in protect provided
tion to interests, their own it also that court approval they (Ins. is essential Code, when are not. 1051.) § Despite foregoing considerations, force if in fact approved trial court in 1936 agreement a rehabilitation only provided
that contrary not for mutualization to the
statutory provisions power also but restricted the of that disposition
court control the ultimate of the assets in the
hands commissioner liquidator, as conservator or I reluctantly judgment
would concur in ground validity agreement judicata. and order is res my opinion, however, the court in 1936 did not exhaust its disposition assets the hands
power to control the liquidator Code, (see or Ins. as conservator
commissioner (d)) cannot and that therefore commissioner 1037, subd. § agreement
carry of the mutualization until out the terms permission of the court in the
liquidator he has secured the he
insolvency proceedings. Accordingly, until secures plan presented price
approval approve he cannot equitable oper- as “fair and
determination committee be known whether (Ins. for it cannot Code, 11527),
ation” § approved operative at all until it is it will become insolvency proceedings.
court provides no “that trans- (d) of section 1037
Subdivision personal property shall be made where involving
action real exceeds the sum property involved
the market value of the obtaining permission first
of one dollars without thousand insolvency proceedings], and then
of . . in the . court [the may pre- court only such terms as said in accordance with subject to the
scribe.” stock $1,000, more than property worth personal
of mutualization is involving property. such clearly is a transaction court unless the complied has been
This section agreement granted permission
approving the rehabilitation terms dispose under the of the stock
to the commissioner might proposed agreement that in the years more price determination committee
future. approving agreement rehabilitation
The order am- *15 provides: 15
biguous. Paragraph Insurance Commissioner of
“That of Cali- State respondent corporation,
fornia as Conservator if he or, appointed Liquidator hereafter be corporation,
should said hereby Liquidator, be
as such and is authorized, without court, fully faithfully and perform,
further order this to discharge all of
carry out, terms, and and the obligations, each part required
conditions, per- and covenants his to be
formed under the terms said Rehabilitation and Reinsur- or Agreement; and,
ance either with further order without make, do, execute, court, any to and deliver and all this things acts, deeds, and
such or him deemed further other necessary
reasonably or desirable to effectuate the and intents Agreement,
purposes of said Rehabilitation Reinsurance confirm Mutual Life Insurance assure and to to Pacific singular properties or all and
Company, successors, conveyed released to
hereinbefore directed to be said from corporation and after enable said
corporation, and to a life conduct and continue hereof conduct date contemplated by said disability business, as insurance ’’ agreement.
Paragraph provides: court, relinquishing by without specific
“That these
provisions any jurisdiction it law, retained as a matter of specifically
do, hereby, juris- and it retain does and reserve proceedings (for within purpose
diction of author-
izing approving any or act the Insurance Commissioner of done, pursuant
the State of California or to be done or in and)
accordance with this order, purpose making
or entering, application of the Insurance Commissioner of California or of the State Pacific Mutual Life Insurance any order, decree,
Company, judgment, ruling or required, requested or
permitted, done, made, to be or entered in con- pursuant
nection with to the terms agreement, said
for the of the purposes effectuation thereof.” contemplated plan
Since of mutualization was not to
be for at formulated least years, obviously court could approve plan
not that at the time it ap- entered its order
proving agreement. rehabilitation Moreover, it did not expressly approve in carrying advance the any out of mu- might presented by
tualization price deter- Although standing
mination committee. language alone the
permitting carry the commissioner to out the rehabilitation
agreement “without further order of this court” might
interpreted exhausting jurisdiction the court’s over mu- may
tualization, reasonably be so interpreted in the
light of express jurisdiction reservation pur- “for the pose making . . . required order .. . ... in con- pursuant nection with or agreement.” to the terms said significant in Carpenter It Mut. L. Ins. 10 Cal.2d P.2d 761], this court was careful to ‘‘ provides
note: also commissioner, either or liquidator,
as conservator shall continue hold all the protection stock of the new as a all old
policyholders. mutualization, Ultimate pol- the event the
icyholders provided so elect is also for. The trial court re- jurisdiction over proceeding.”
serves the entire Paragraphs by interpreting be reconciled them as author-
izing commissioner without further order of the to court
carry agreement out rehabilitation to the extent that its
provisions represented completed plan for rehabilitation and reserving juris
reinsurance, to the court and at the same time disapprove plans developed to in approve be
diction to disposal of the stock future for mutualization other interpretation commissioner. Such an the hands purpose 1037, of section primary order subserves the involuntary mu governing (d), and the statutes
subdivision right securing parties all interested their
tualization substantially proceedings scrutiny steps of all in the
court reasonably susceptible rights, and the order is
affect their since Although adopted. interpretation it should be approv agreement order validity of the rehabilitation order is not judicata,
ing interpretation are it res interpreted to sanction not judicata, and it should
res res statutory provisions than departures from the
further (See Lawson, 166 Cal.
judicata Watson v. compels. Treece, Cal.App. 961]; P. Treece v. 95].) judgment
The should be reversed.
Schauer, J., concurred.
CARTER, J. I dissent. majority opinion masterpiece legerdemain. of legal whereby policyholders approves
It a transaction of old deprived $18,000,000
company $24,000,000 of between they concept of are entitled under law and which deprives
justice. company It the stockholders old also company may value their stock old worth
whatever company of the fact that assets of old which were
view new at the time its creation were
transferred to $200,000,000. majority over in excess of concedes
valued insolvency proceeding an was created in agency always proceeding used said as an
and has been rehabilitating purpose insurance commissioner proceeding is company, and that
an insolvent insurance such completed. pending rehabilitation has been
still because company is holds that “the new solvent
It nevertheless ’’ though obligated pay even it owes and is nondeliquent, $18,000,000 and between policyholders old admittedly financially pay. is not able
$24,000,000 express majority disregards this transaction approving deprives
statutory provisions the stockholders this state and right judicial company of old their policyholders they whereby were proceeding of the administrative
review process denying them property, thus due deprived their *17 they
of law to under which entitled both state federal provisions.
constitutional
The Undeniable Pacts July 22, 1936, 3,000 some 300,000
On stockholders and
policyholders of The Company Pacific Mutual Life Insurance
of California, old company, hereinafter known as were stunned
by the charge news that the insurance commissioner had taken
of company, alleging it to be insolvent. development This all shocking
was the more of because its suddenness also only
because before, regular, short time verified, annual company
statement of the showed it to be sound financial
condition, previous as year had similar from statements
year consistently throughout shown its lifetime of over
years. The business of company and assets old were then
taken over pur insurance commissioner of this state provisions
suant to the of sections and 1013 the Insur
ance Thereafter, Code. The Pacific Mutual Life Insurance
Company organized was part‘of plan of rehabilitation company by purchased old the commissioner who entire
capital stock with company. assets of old Pursuant to section 1‘ 1043 of Code, Insurance Rehabilitation and Reinsur agreement
ance” was company entered into between the new
and the then insurance commissioner, as conservator of old
company. provided The organiza rehabilitation for the
tion of corporation capital a new of $1,000,000 with a 10,000
consisted of par at a shares value $100 each. The purchase
commissioner outstanding was to all the stock company
the new $3,000,000 belonging with in cash to the old
company (which gave company new surplus an initial
$2,000,000). The commissioner was then transfer all the company (with
other exception assets old the stock company which, new course, was owned old company) company, company new and new policies was assume all obligations company of the old provided to the extent plan. provided company new would obligations of company existing
assume all the the old under
policies exception with the of the non-can policies, which
obligations were assumed a reduced schedule benefit at premium agreed
the old rates. It was further benefits designated
would restored out of certain income of new
company. All company’s new stock purchased was $3,000,000 company’s out addition, old all funds. other (over $200,000,000 assets old assets in addi agency organization concern, good will, going
tion (Carpenter etc., “worth several millions dollars” 761]) L. Ins.
Mut. were company. Therefore,
transferred to new owes company. confiscatory to old
its creation existence including proceeding, present ma
nature of this entire apparent old
jority holding, when we see that is at once ultimately only receive
company’s $3,000,000 will stockholders which, over, when old was taken
for their stock phis $200,000,000 in cash over
supported amount going will, business plus good the value of
various assets of dollars! The
organization, worth several millions etc., company of
agreement for a to new provided thus transfer *18 exceptions relevant company (with certain of old
the assets obligations by company of the
here) assumption new and the policies. excluding noncancellable certain company,
of old policies, as the “non-can” policies, known regard
With to these obligation agreed set limited company assumed a
new of benefits thereunder. special for restoration
up a fund outstanding. capital unpaid and obligation is still This commissioner, by held company to be new was
stock creditors, of the liquidator, for the benefit conservator, or as company. On Decem of old
policyholders, and stockholders by court. the trial agreement approved was 4, 1936, the
ber 332, Co., 10 Cal.2d L. Ins. Carpenter v. Mut. Pacific 305 Carpenter, U.S. v. (affirmed Neblett P.2d 761 334 [74 held that 182]), was 83 it L.Ed.
297 S.Ct. [59 plan to rehabilitate of a company, part as organization of new out pointed is proper. It company of old
the business policy event the in the mutualization, 322) (p. that “Ultimate ’’ for. provided holders so elect is also February 2, 1937, an order was providing
On made liquidation company of the old and appointing the insur liquidator. as upheld
ance commissioner This order was on Co., v.
appeal (Carpenter Mut. L. Ins. 306 13 Cal.2d Pacific company 637]), although old has never been dis P.2d [89 April 4, 1938, commissioner, liquidator, solved. On capital company new title to the stock of
transferred upheld (Cami on
voting appeal trustees. This transfer was Ins. 22 Co.,
netti v. Mut. L. Cal.2d 344 P.2d [139 Pacific case been decided 908]). (Other aspects of this have 22 Co., Mut. L. Ins. Caminetti v. Cal.2d this court Pacific 22 779]; Co., Mut. L.
77 P.2d Caminetti v. Ins. [136 Pacific Mut. Ins. ; 386 P.2d Caminetti v. L. Cal.2d 930] [139 Pacific
737
741];
P.2d
eblett
Ins. acquire (see
New now stock seeks later dis- through
cussion) the device of mutualization under section
20(a) agreement. The of the rehabilitation
plan provides price paid company’s for new If $3,000,000, simple non-can
stock is interest. benefits purchase fully prior January 1, 1973, price restored of $250,000 to be increased an additional sum each year by completion
full pre- the date of restoration price absolutely
cedes December, purchase is not 1973.
payable, paid only if” but is to be “when and all the follow-
ing (1) completed; conditions are Non-can met: restoration is
(2) special (to in a surplus pur- funds fund be created plus plan) surplus
suant to capital of new com- purchase
pany, equal or price stock; (3) exceed the condition that, the new is such after financial paying cancelling stock, for and would have ad- still amounting
mitted assets excess all its liabilities per
sum of 4 plus per cent of all admitted assets cent premiums during preceding year collected calendar group one-year all insurance written on a term basis and
on all accident and health insurance.
This résumé shows that was brought into *19 of
existence as a creature the state to rehabilitate old company carry on
and to purpose. its business for that It also shows grievous injustice being* perpetuated the. majority in
approving plan of mutualization used here—that of vol-
untary of corporation. mutualization an insolvent This type of voluntary mutualization is as voluntary as a confession
given force, duress, under and bodily threats of injury. Non- fully
can benefits have not been restored; even under the plan contemplated they
mutualization it is fully will not be (if partial payments
restored benefit can be considered “full”
restoration) until 1973. Until they such time as are restored, cannot be considered as a solvent concern since policyholders
it still owes a debt to the of stockholders
old company, admittedly which it cannot pay. now
amount of this debt is conceded to be between $18,000,000 $24,000,000. How can it said, any then be degree honesty company is whatsoever,
of that new solvent statutory provisions relating
avail itself mutualiza- anyone give defy I an affirmative answer to this
tion?
question. Proceeding
Present 20(a) of paragraph under rehabili- Purporting to act agreement, a of mutualization
tation and reinsurance September and,
was formulated the committee plan protected
the insurance commissioner found that the company, policyholders
rights and interests of new he would was satisfied that
shareholders, and equitable operation.
be fair and in its reinsurance
Paragraph 20(a) of the rehabilitation and
agreement provides: Disposition Company of New Stock
"Mutualization nor, appointed, if one
"(2) Conservator, Neither the any dispose of Company, shall Liquidator, the Old Company except as follows:
the stock the New January 1, July 1, any 1946 and
"(a) At time between Liquidator or long as the Conservator
1948, and thereafter so any or all of said Company may continue hold the Old (10%) participating holders of
stock, percent ten policy holders’ at a
policies of life insurance entitled vote fqr voluntary New proposal
election on a issued hereunder or those
Company, re-insured whether those (each purpose Company policy holder New number of person regardless being regarded one as request held) may of insurance
policies or amount owned Appointing Committee Company to create an
the New functions here- the duties and provided to exercise
hereinafter voluntary mutuali- proposed specified respect of a inafter with the laws Company, in accordance
zation of the New request, the time said of California effect at State depart- any or more permit, of one or, so if said laws then or department request specify the shall
ments thereof. Such Company be mutualized. desired to
departments of the New request Company shall receipt the New
"Upon of such Pres consisting of the then Appointing Committee
create an Presidents, of Life Insurance of the Association
ident Provost and the University, Jr.
President of Leland Stanford persons or Angeles, Los University of California at any if their titles positions their
occupying similar one more changed. the event have been shall *20 remaining act, refuse or be unable to persons shall
such vacancy thereby fill or or members shall
member vacancies appointment writing person in of
created another their standing. If persons position of all of
or similar said any Judge
persons act, or unable or refuse Court application Commissioner, shall,
thereof of the des Appointing consisting of
ignate (3) an Committee three
persons position standing. Appointing of similar Said acting through majority of
Committee, not less than a designate
members, shall a Price Determination Committee persons
of less (5) than three and not more than five company valuation,
skilled matters insurance acting through majority thereof,
committee, not less than opinion proposed
shall determine whether volun their
tary Company, department mutualization of New departments specified request thereof in said then be can
practicably accomplished having regard due to the interests * persons Company all New If can interested practicable be determined such mutualization is not then steps possible
no further shall be taken in connection awith provisions
mutualization of Company New under the subparagraph
this until at six date least months after the majority opinion
such determination. If in of a prac
members of the such mutualization is then committee price
ticable, proper shall committee determine the
paid upon pay appropriate such mutualization and terms however, thereof; made,
ments said shall not be determination
prior January 1, 1947.
“If, at appointment the date such committee Company
the New shall have force Participating Life written, subsequent Insurance to the effective date agreement in an amount in excess of its Non-Participating
Life during written Insurance same period, one-half (%) shall, of such purpose fixing excess for the proper
price (but be paid for no purpose) other be deemed be,
and shall Non-Participating be valued as, Life Insurance.
If appointment, at the time such there shall have been from Participating Department
transferred in accordance provisions sub-paragraph
with the (d) of paragraph
hereof, percent (10%) less than ten of the then accrued
earnings therein, described ifor there shall have been trans- Participating Department
ferred any working capital
pursuant provisions to of subparagraph (c) para- said concerned with the protection of those interested in the insolvent company. statutory relating companies
*The scheme to insolvent *21 shall, graph 6, any unpaid purpose thereof for the balance fixing price paid (but to for no proper pur-
of the be other and matured.
pose) be deemed to a debt then due Said be report Company its the New include a
Committee shall in to Company, depart- of or of
plan mutualization of the New the request specified in of the departments
ment or thereof said any
policy plan specify, shall in addition to holders. Such paid, be the terms matters, price
other relevant the to persons manner in
payment, and the whom and the which right Company is be exer- to vote the stock the New payment purchase price. In pending complete
cised advisable, if deem it Committee,
this connection said voting trust,
may provide plan for of a the creation provision for
designate trustees, the initial and make under
appointment of Unless the benefits their successors. fully policies have been restored and
Non-Can theretofore paid, against Liquidator fully plan shall
claims such provide
further such mutualization shall affect paragraph paragraph 17 or of 14 hereof or
provisions of right of holders Non-Can Policies to restoration provided. from therein
benefits the manner sources days sixty (60) Company agrees “The New that within report be making report (unless said shall
after the such practicable) is not then
to the effect that mutualization policy holders copies mail to all entitled
it will thereof if submitted upon plans of mutualization plan
to vote such or twenty days (120)
according to law. If one hundred within mailing per (10%) cent. notice, of such
after the ten plan plans or any such
policy holders entitled vote regarded one
(each policy being purpose as holder for amount regardless policies
person of the number owned writing request in the submission held)
of insurance shall the same promptly submit
thereof, Company the New will of the State California then
in accordance with the laws any successors for himself and
in effect. Conservator ownership claiming under him
in the said stock pursuant through sale of said stock
manner other than agrees consent subparagraph (d) hereof provisions of hereby holder and owner of the stock consents as of mutualization. the event Company
the New such Conservator, or a adopted,
said mutualization dispose in accord- of such stock
liquidator aforesaid, shall as proceed- foregoing plan. expenses such
ance with Price Deter- including costs, expenses fees and
ings Committee, shall be borne the New Company,
mination plan of proposed is consummated,
and unless the mutualization charged Participating Department
shall to the thereof.
“In the Price has Determination Committee been event provided prior January
appointed 1948, herein said power
Committee shall have to extend the within time may period effected hereunder such periods necessary orderly of time as it deem for the
completion proceedings of mutualization as herein ordered.”
(Emphasis added.)
Mutualization provides
The Insurance Code for mutualization of insur- ways. companies in part
ance two different Division 1,
chapter 1, 14, 1010-1062, article sections entitled “Proceed-
ings Insolvency Delinquency” Cases and provides in for “Mutualization,
section 1043 reinsurance and rehabilita- 2, part
tion.” 2, chapter 13, 1, Division article sections 11525-
11533, “Voluntary entitled Mutualization of Incorporated Disability
Life and Having Life Insurers a Capital Stock Issuing Nonassessable Policies on a Reserve pro- Basis”
vides sections 11525 and 11526 the “Authorization to
mutualize” “Method mutualization.” dispute concerning
There is no actually method used proceeding. this provided rehabilitation for
“voluntary” proceeded mutualization and the matter under 11525 11526. complete
sections There disagreement is as
to which should have been Appellants method used. correctly procedure
contend outlined for “involuntary” of an
mutualization “insolvent” insurer only is the proper
method. Carpenter As stated in Mut. L. Ins. 10 Cal.2d 761], 328 “. . . proceedings here under
review taken under were sections to 1061 of the Insur- adopted in Code, (The
ance 1935.” other cases heretofore statement.) have original
cited reiterated this seizure accomplished old under section sub- (d). 1045 provides
division Section “Mutualization of life issuing policies
insurer nonassessable on a reverse basis: For- If plan. mation at time the issuance an order after affecting issuing
under section life insurer nonassess- on policies organized
able capital reserve basis and with a
stock shares thereof it appear shall evidenced the com- purposes
missioner that the section 1011 can be best attained insurer, the mutualization such the commissioner life may such insurer.” formulate (Emphasis added.) litigation had in have been proceedings
All heretofore this relating and de provided
as for in article 14 to insolvent agreement provides for
linquent rehabilitation insurers. The statutory up for solvent
mutualization under the scheme set company is majority opinion “The new
insurers. The states why nondelinquent, and there is no reason
solvent and sound relating to in mutualized
it should be under the statutes . . . to insol
solvent insurers. Section relates [which into re to enter
vents], which authorizes the commissioner express on agreements, no limitation
habilitation contains them, and also may
what be included in section [which provides that the enumeration
relates to insolvents] be construed as a limita
powers of the commissioner shall not right such acts he upon him or his to do other
tion handling of necessary deem in connection with added.) Thus company.” (Emphasis of an
affairs insolvent relating majority procedure to insol opinion admits the impliedly one admits that
vents was the used using code re sections procedure. However,
correct insolvents, argues these sec
lating then the author place upon the commissioner. Section
tions no limitation authority of commis provides powers and (which relates to proceedings
sioner in “under article” right his
insolvents) shall not be construed as a limitation necessary may deem ex act or to that “which he do purpose accomplishment in aid
pedient ’’ *23 again (relating 1043 proceedings. Then, citing section such properly company was the new insolvents), we told that “evidently concluded”
organized who the commissioner parties” of and “other interested protection creditors
that a through of new the formation accomplished
could best be of possible the control
company far as from “divorced as it ex charge company when of the old
those who were Then we are told
perienced difficulties.” financial entity. We are told company separate
new is a and distinct of new com any of the character
this without discussion unsupported only and dictum
pany, and unreasoned with Cal.App.2d 1, Co., 83
in Garrison v. Mut. L. Ins. Pacific authority 893], 9-10 therefor. P.2d [187 here) provides (the procedure followed for
Section A incorpo- solvent domestic
“Authorization mutualize. represented having paid-in capital a out-
rated insurer issuing,
standing capital of and on a reserve shares stock or of life policies of life insurance both
basis, nonassessable disability insurance, may incorpo- into convert an itself or disability insurer, insurer,
rated mutual life life issuing To policies a reserve basis. nonassessable carry acquisition provide end it out a for outstanding capital shares its stock benefit policyholders, policyholders, its class classes of its
by complying requirements chapter.” (Em- with the added.)
phasis question directly posed is thus as to whether new com-
pany falls within the classification of a “solvent” domestic
incorporated “may insurer which convert itself an in- into
corporated “may mutual provide life insurer” which
carry plan for acquisition outstanding out a shares ’’ capital policyholders. its stock for the benefit its Company
Character New company organized by
New was the insurance commissioner “with name similar to the old aas cor-
porate agent to him carrying assist on the business of the company”
old (Carpenter v. Co., Mut. L. Ins. Pacific 307, 324, 761]). P.2d It was also said there (p. 327) proceeding that “The was had under sections 1061 of specially Code Insurance deal with liquidation rehabilitation and companies. of insurance
Those up comprehensive sections set statutory scheme to
accomplish proceeding those results. The is not one in which party another is prosecuting party another at all. It
simply a proceeding in which the invoking power state is corporate entity over a permitted by the engage state to in a vitally
business affected public interest con- of continuing
dition compliance requirements with the pro-
vided controversy state. It is private between parties proceeding by but a state the interest public.” See also Caminetti v. Mut. L. Ins. 22 Cal.2d 779], where it held “The new corporate agency was the the Insur-
ance Commissioner as conservator purpose con- tinuing preserving company.” business the old (Emphasis added.) held, commissioner either as conservator or later as
liquidator, capital entire stock until *24 voting (Caminetti v. when was transferred to trustees 908]). Mut. L. Ins. company said affairs of the new are was there that “The It agree to
placed charge in board of directors whom the of a large Super expressly measure discretion.
ment confides however, commissioner,
visory powers, reserved to are the statutory powers over
independent of to his addition companies. no
delinquent example, For invest insurance company or of the assets the old
ment reinvestment Pay approval of the commissioner. made without written subject policies for are fund non-can
ments to the restoration may re who, addition, approval commissioner
to the the by the payments thereto. The determination
quire further expenses and the apportionment of directors of the
board departments of new
exchange among several the of assets the Re subject adjustment by commissioner. the
company is to subject assump against policies company old to
serves agreement were be established
tion or reinsurance under approval in accordance company with holder While as requirements the commissioner. with the voting rights in possessed the commissioner stock the provision express no agreement contains thereto, the cident . voting power. . . respect to the exercise
with of the new given legal title stock
“The trustees rights of owner- to exercise all power commissioner, however, retains entire
ship. beneficial the old creditors interest benefit of for voting trust undertakes others interested. transfer stock, relating to only duties administrative the trustees right (Emphasis the same. ...”
principally the vote
added.) possess sol- not the characteristics does
New First, generally term understood. company as that is
vent organized agent of the commissioner rehabili- as the
it was may be, as company. of the old It was said the business
tate entity without de- case, that a distinct it is Garrison agent an for from the fact it is still
tracting the least company. agent, rehabilitating the old An purpose usually entity, but the duties and ac-
servant, a distinct agent servant, are carried out to serve such
tivities agent words,
purposes principal. In other acts himself, or itself. Does the insurance principal, customarily, stock ordinarily, hold all the
commissioner company? Does the insurance commis- solvent insurance
of a *25 himself customarily, and to ordinarily, have reserved
sioner “independent powers, in addition to his
supervisory company a is
statutory where solvent concerned powers” ordinarily, customarily, an insurance commissioner
Does
give approval of the investment his written or reinvestment company a insurance %
of funds of solvent Does the insurance ordinarily, customarily,
commissioner tell board company they ap- a
directors of solvent when and how must
portion expenses exchange among assets its several de-
partments company, %In the case new the commissioner things. (See opinion all of those Chief Justice
does Gibson’s
in Caminetti v. Mut. L. Ins. 908].) company
New would have no existence had it not been for insolvency company. money No technical old con- company organized
stituted the assets of new which was company.
the assets of old If new were a solvent
independent corporation, and distinct the insurance commis- holding
sioner would not be its stock policyholders for the company.
old stockholders of new would hold- be
ing supported by their own stock assets hands directors company.
officers and of the Section provides “A incorporated solvent domestic insurer having [is one] capital paid-in represented a by outstanding capital shares of issuing, basis,
stock and on a reserve policies nonassessable
life insurance or of both life disability . insurance. . .” Surely ease, in the normal “outstanding shares capital by
stock” refers to stock held stockholders, by the com- !
missioner Traynor pointed
Mr. Justice has out how the use of the procedure
solvent mutualization deprived has the members of right
old protection their to the scrutiny of court plan of mutualization. He shows how procedure used apply
here to cannot the facts of the case because in the or-
dinary voluntary case a mutualization, the shareholders power
would protect have to their by interests withholding plan
their consent to the of mutualization. The sections of
the code which relate to mutualization of companies insolvent clearly by Legislature
were intended protect the in-
terests of interested parties providing ap- court proval. present In the case procedure use of provided
for in the case company, solvent ap- commissioner proves a plan formulated be in the future. When that plan. he all the votes for the formulated, stock, holder of as equi- fair and commissioner, approves he as
Then, as must majority opinion that “it are told
table. We commissioner Legislature realized
assumed plan in a upon the fairness of a case
might required pass previously consented to he, acting conservator, had where ’’ Nothing of the on behalf the stockholders. read- It is obvious from even casual
kind must be assumed. relating companies insolvent
ing provisions code companies (11525 seq.) relating to
(1043 and those solvent et thought Legislature not the faintest seq.) that the had
et they case, commingled as be so
the two would placed position in a where he would be
that the commissioner years in approve plan be formulated some 10 forced to plan was forced to vote future, then, when the formulated give stockholder, later, of it as a sole and still approval
an something of he had theretofore twice before approval
his
approved. receivership proceedings inception* of the
Ever since the parties organization of all the and new rehabilitation have been concerned matter
proceedings jurisdiction continuing supervision of the
subject to the pointed phases litiga in various of this It has been out
court. organized by commissioner new as
tion that com agent to rehabilitate the business old corporate
his proceeding (d) original under section
pany. Without not have come Code, Insurance would
of the being.
into pro- to in methods necessary, next, note the difference
It is in the divisions the Insurance Code
vided for two companies. and solvent of insolvent
mutualization plan mutualization provides “Said [called
Section companies
involuntary for insolvent and fol- mutualization any “If (1045) provides: at time
lows section after 1011” the “commis- an order under section issuance plan include shall sioner” shall formulate mutualization]
provisions for: acquisition by capital
“(a) [Acquisition of stock.] capital its at a outstanding shares of stock insurer of all
such conditions to be fixed as hereinafter
price terms
provided. * (With exception present proceeding he hereinafter to
discussed.)
“(b) capital The retirement said [Retirement stock.] acquired by
shares of stock when such insurer.
“(c) amendment [Amendment charter.]
charter of such insurer so as to enable it to transact busi- its
ness as issuing policies a mutual insurer nonassessable on a
reserve basis. “ (d) [Payment of The manner in which and claims.]
time which, within effected, after mutualization is matured maturing against paid claims such insurer shall to
lawful holders thereof.
“(e) of plan policyholders.] The submis- [Submission plan
sion said policyholders mutualization of such procedure
insurer under such set forth in shall be prescribed by
or court, approval rejection. said for their
“(f) Notice the shareholders [Notice shareholders.] insurer,
of such in such manner and such time at after the
approval of plan by said mutualization said policyholders,
as the court direct.” 1048 provides Section that after the formulation plan, the commissioner shall submit it to the directing
court for its order the submission thereof
policyholders (e), named in subdivision section 1046. (relating
Section 11526 insurers) provides to solvent
“Such shall appropriate proceedings include for amend-
ing incorporation give insurer’s articles effect to the
acquisition, by insurer, policyholders said benefit of its outstanding class or thereof, classes shares of capital stock and the conversion of the insurer from a corporation corporation
stock into a nonstock for the benefit
of its members. The such corporation members of nonstock *27 policyholders
shall be the from time to time of the class or
classes for whose benefit the of stock the insurer was acquired, persons. plan
and no other shall Such be:
“(a) Adopted by majority a vote of a of the directors. distinguished from the formation by thereof the commis-
[As provided
sioner as in section 1045.]
“(b) Approved by the vote of of holders at least a
majority outstanding of special meeting shares at a of
shareholders called for that purpose, con- or the written of
sent distinguished such shareholders. from section [As requiring approval commissioner to obtain court directing
and an order of the plan court the submission of the
to the policyholders.]
“(c) to the commissioner him approved by Submitted writing. prevailing the circumstances here with [Under liqui- regard position conservator, as the commissioner’s supervisor company, this general
dator and of amounts
to an idle act.] “ by majority policyholders (d) Approved a vote of all benefit the stock is to be ac-
of the class classes for whose policyholders voting at called for
quired an election . . subject provisions of section 11528. . purpose, in the of Insurance Commissioner
“(e) Piled office provided (b), having approved been as subdivisions
after
(c) (d) this section.” agreement, a provisions
Under the the rehabilitation consisting four members was
price determination committee reported to new up. price
set determination committee practicable
company, April, 1950, that mutualization $3,000,000. company at
and valued the stock of new part payment for plan provided in
mutualization long the rate term
purchase price simple interest at of the re-
government (2%%). Under the terms bonds for himself and agreement, “The Conservator
habilitation any claiming ownership
for said stock successors through him in than a sale said
under manner other provisions sub-paragraph (d) hereof pursuant
stock
agrees hereby holder and owner to consent and consents as the Company plan such of mutualiza- stock of the New plan adopted, In the event said mutualization
tion. aforesaid, dispose shall
Conservator, Liquidator a plan.” in accordance with such
such stock voluntary procedure heretofore mutualization set
Under the (section 11526) plan is
forth submitted majority adoption by a commissioner vote
to the after by majority of and after a vote the out-
the directors meeting of
standing special shareholders called shares at “The Com- purpose. provides Section to him under the plan shall examine the submitted
missioner
provisions (c) of 11526. Be of subdivision section shall
approve rights in- opinion such unless in his insurer, policyholders terests and shareholders
protected nor will be unless he is satisfied fair equitable operation.” (Emphasis added.) in its Pair f equitable to agreement here- provision of the rehabilitation
Under the agreed himself, forth,
tofore set the then commissioner any plan agree promulgated successors,
and his *28 749 committee. It should borne in mind price determination held voting the stock now discretion, (as in who had no but were stated the
trustees answering p. brief, 73) only commissioner’s “not
insurance give consent; they
authorizéd, but bound their [that] (Emphasis no that of
had discretion to exercise.” the com-
missioner.) There is evidence the record shows that plan they
the voted for the mutualization because trustees they vote;
were told to so did not examine into the plan. step provided for in
merits the next section (Ins. plan Code) shall is that be submitted to the approval.
commissioner for his written The insurance com- (Answering p.
missioner brief, 83), states “As we have al-
ready shown, Liquidator has bound him- [commissioner]
self to a Plan of proposed consent to Mutualization in accord- Agreement.”
ance with the Rehabilitation The code, how-
ever, (§ 11527) provides that the commissioner shall examine plan him under provisions submitted to of subdivision
(c) section 11526 and that not approve “He shall such
plan rights opinion unless his and interests the in- surer, policyholders its protected shareholders nor plan unless he is will and equitable satisfied fair operation.” (Emphasis added.) The net result, under prevailing case, circumstances is that the commis-
sioner, as beneficial owner all the the new company, stock of voting any plan
instructs the proposed by trustees to vote for price then, plan determination committee when such places
is submitted to him for his approval, stamp his rubber approval (or predecessor) thereon because he has, his
years prior promulgation agreed plan, approve no is—agreed, only himself,
it matter what it but for office, approve plan proposed. successor in It is
shown, therefore, doubt, without a shadow of a agreement approve any plan
earlier proposed price nullifying
determination committee has the effect of section Code, relating the Insurance as well as the sections
to mutualization of insolvent insurers. procedure
Had the outlined in sections and 1048 followed, very
been the result would be different. Under
section would formulate the mutualiza- commissioner plan purpose carrying
tion rehabilitation of out the provisions
the insurer whose business was seized under 1011.
section The commissioner’s then be sub- would directing
mitted the court for its order submission policyholders to the shareholders and of approval, disapproval insurer for their vote the seized *29 might (e) (f)).
as the subds. (§ ease Old com- company
pany, having dissolved, exists; been still new agent organized corporate of
was as the the commissioner to company
rehabilitate of old the assets of the business company. company cannot, appears,
old New as it be con- organization completely independent as a and solvent
sidered out, I prevailing. pointed
under the here As have the facts beneficial in all
commissioner holds the entire interest the
capital company stockholders, for benefit of stock of new the legal
policyholders company; of old the title and creditors by voting company
to the of new is trustees who stock held As I have
vote as the commissioner. also directed
pointed out, of directors of new are under the board supervision,
the control and direction of the commis- close reality, every from must, in orders him as to
sioner and take
major, minor, business details. It cannot said and some in supervision, exist the close control and direction corporation.
usual “solvent” Company
Corporate Entity New of corporate entity of com argue the new
Respondents disregarded proposed so to make the
pany cannot be company. support of old In mutualization
mutualization a Mortg. 157 Misc. contention, In Bond Guar. Corp.,
of this re L. 623, 652], and Mut. Ins. Garrison N.Y.S. 893], In 9-10 cited. Cal.App.2d 1, Co., Bond & involved. the ease
neither was superintendent of insurance had case, the
Mortgage Guarantee Corporation Mortgage “as a Guarantee
organized Bond & capital $1,000,000, a corporation, with insurance
domestic contingencies for reserve surplus $2,000,000, and a a guar paid out of the assets was
$200,000, all of which exchange capital stock for the entire company in
antee each; par value 10,000 $100 shares corporation, name was issued of shares for number
a certificate said superintendent and is held guarantee (in benefit the creditors asset, an
of insurance as (Em guarantee company.” of policyholders), cluding involved took corporation here guarantee added.)
phasis basis on restricted mortgages, “but duty insuring on the 650.) (Pp. 641, This guaranty.” policy a limited under whereby People, and certain proceeding involved case enjoining interested, applied an order individuals Mortgage demanding receiving
State Commission from assuming being mortgages control of certain serviced guarantee in corporation pursuant to court order. The
junction granted. guarantee was The contention was that the
corporation, servicing acting ade mortgages, was without
quate corporate powers. corporation held that the court acting corporate authority and, within to the its answer corporation agency guarantee
contention that the awas state
inseparable superintendent (so from insurance as to
permit another agency, Mortgage state Commission, being proceedings came been into forth had set after
had) over, corporation to take it said: is court “Said any entity.
like corporation; other All of stock distinct by guarantee company, owned the certificate therefor custody superintendent;
is held in the this he holds as
he rehabilitation, does other assets as a *30 designated
receiver statute for the of by benefit the creditors company; stockholders of owner, represent said not as an
ing corporation, having the state. It is a stock created, been
for thing, possible one with a view to its sale the for benefit creditors, by-lams the as its exhaustive apparent. make of During such time as the is, stock control remains as it the
operation corporation of the supervision is to under the of
the superintendent as (Emphasis rehabilitator.” added.) continued and primary court said that the management
of the corporation was with the board of although directors, subject supervision was to the of superintendent “in capacity
his supervisor as companies” insurance (pp. 651,
652). presented in The situation the New York case and presented factually in case up at bar are similar to point. quoted I have extensively heretofore from Caminetti
v. Mut. L. 22 Co., 344, page Ins. Cal.2d at 356 [139 Pacific P.2d wherein 908], we set forth the extensive and minute
supervision by exercised the commissioner over new com
pany. supervision by This anything exceeded far required of him “supervisor companies.” insurance We also Carpenter in
said v. 10 Co., 307, Mut. L. Ins. Cal.2d Pacific 324, 761], 325 P.2d company that new organized was [74 corporate agent “as a to him carry assist in [commissioner]
ing company.” on the business of the old (See also Caminetti Co., Mut. L. 22 Ins. 779].) P.2d Pacific In Garrison v. Mut. L. Ins. Cal.App.2d 893], said, question the court “The for decision
is whether an company organized insurance which was to rehabilitate company an insolvent insurance
conserve by pay allowed obligated to interest claims business is against insolvent, based the breach such
the conservator from absence policies, the latter certain pay promise agreement specific of a such
rehabilitation for having provided payment
interest, agreement liquidator for of such claimants an amount benefit against claims’ the insolvent equal to of all allowed the sum company, by the terms the rehabilitation
company.” New pay liq agreed (Paragraph 17) “to
agreement had equal claimants an amount to the payment
uidator liquidator against old filed with the
sum of all claims question put finally The court answered the allowed.” customary liquidation practice “It
with this statement: debtor, fix marshal the the amount
proceedings to assets among the disburse the assets creditors its liabilities and process possible, during if
pro would rata. Such varied the addi liquidation, the claims should be
season (P. 9.) Respondents of interest.” varying amounts
tions following paragraph opinion from the
rely upon “Appellants case: Court the Garrison contend
District company and, of old is a reincarnation impliedly promised pay all of
therefore, has the latter’s they ignore provisions of the Insur
indebtedness. 1, part 2, chapter division Code, article 14
ance insolvency liquidation proceedings. deals with article any proceeding provides of such article
Section article, may mutualize reinsure
under commissioner proceedings thereunder person business affected agreements. into rehabilitation New enter .organized by sovereign power purpose re very habilitating one its own whose the business creatures *31 people. It in the blood sweat the existence inhered of identity of state. Its go guidance forward the the under
was notwithstanding utterly company, from of old distinct
is company’s of stock. equitable ownership new It
the latter’s company. of old fairly it is a be said that continuance
cannot or assume its burdens latter’s assets did not take over the
It assumption company. transfer and of old Such the behest
at public the weal and were indispensable rendered
were good general in by common required law conserve the company particular. in New of army policyholders old in company old to do service organized
company was but created the state for the latter was prescribed manner
a act in perform public a service. It must its own of human
right and commerce and upon the arena trade collapsed from institution which
existence, free the fetters a only changing soon be kaleidoscope world will organized memory.” (Pp. 9, 10.) company New was company; of old as the
the state to rehabilitate the business
“corporate agent” of insurance commissioner for that illogical language just quoted is, part, under
purpose. The long litigation, including presented line
the facts appears case. It to me that the statement that
the Garrison company] identity utterly is distinct” is incon
“its [new part
sistent with the latter the same sentence that this was “notwithstanding company] equitable
so the latter’s [old
ownership company’s of new stock” and with one company
preceding sentences wherein it is said that “New organized by sovereign power purpose for the
rehabilitating company, of” the business old and the fact company go guidance
that new “was under forward obligations imposed upon
the state.” The duties and commissioner this case to far more amount his usual than
supervision company. of the usual solvent insurance There company separate corporate
can be no doubt that is new
agency organized by it company, that was not old but it logically “utterly
does not follow that is it distinct” from company. my opinion, company
old would have no insolvency proceedings against
existence but for the old com
pany. conclusively quoted appears It also that the statement
from nothing case is dictum since had Garrison to do question
with the involved there.
Respondents argue also that because this court said in
Carpenter v. Mut. L. Ins. 761], company was, reinsurer, that new as a “sub- place as an insurer in original
stituted and stead corporate identity
insurer” company of new cannot disregarded; Carpenter that because this said in court “Every (p. 335) policyholder
case who consents clearly Company”
Plan enters into a novation with New companies “essentially
that the two cannot be considered as company replace
one and the same.” will in New time old
company long but so as old any form, exists in it is only corporate
clear that new agent still purpose rehabilitating commissioner for the busi-
ness old and that the mutualization must procedure provided
be worked out in accordance with *32 relating involuntary part of Code the Insurance companies. The of new com- of insolvent stock
mutualization ownership by voting trustees, with beneficial
pany, held now by him for the benefit commissioner is still held company. fact policyholders of old This and creditors rights policyholders of the disregarded; nor can the
cannot disregarded. holding In company creditors old company from old “utterly
that new is distinct” forget majority court chooses to purposes, all this pretends that new concerning litigation and
all the this foots any insurance organized other commissioner liabilities, insurance
its own assets and that the affairs, and over its only normal, nominal, supervision
had In involved. had ever been insolvency proceedings no holding cannot light us, such of the record before scrutiny. of honest the test
stand Judicata Res superior argue has been decided Respondents that it in a authority include had the commissioner
court new com- option to mutualize agreement an
rehabilitation dispose of agree by voluntary proceedings and pany terms, fixed price, and on the company at the of new stock court this committee; and that price
by the determination so jurisdiction to superior court had
has decided that discretion abuse its superior did not court
decide agreement.
in approving the rehabilitation found 61) is (p. answering brief
In the commissioner’s have been attack seems true that no “It
this statement: rehabilitation provisions on the mutualization made [of the courts but proceedings, any appellate agreement] in appeals.” determining various them in
have taken notice court, concerned has been court, appellate an nor Neither provisions of mutualization litigation with of this appear. hereinafter agreement as will the rehabilitation Co., Mut. L. Ins. 10 Cal.2d Carpenter In v. Pacific of rehabilitation 761], we said that P.2d
322 [74 mutualization, policy* in the event “Ultimate
provided for there concerned in the main with We were elect.”
holders so corporate agent company as the of new organization company. rehabilitate the business of old
the commissioner Co., Ins. 13 Cal.2d Mut. L. Carpenter v. [89
In Pacific validity with the of the “Order 637], were concerned P.2d we provisions Liquidation” Co., Mut. Ins. Carpenter v. L. not considered.
were Pacific 796], Cal.2d 704 we were concerned with an
order correcting pro of the trial court nunc tunc. minutes, In Caminetti Mut. L. Cal.2d 77 Ins.
P.2d 779], dissenting were we concerned with claims of
policyholders and, again, provisions once the mutualization
were not
In
Co.,
considered.
Caminetti v.
Mut. L. Ins.
Pacific
new under the of section subdivision
(e), of the adopt Insurance Code. We said there that “To 1037(e) contention that section was not intended to
apply organized stock of an insurance as a medium through delinquent business rehabilitation accomplished disregard
insurer was to require would us to language 1037(e) clear specifically the statute. Section
refers to stock issued the commissioner ‘as conservator or liquidator rehabilitation or connection with a reinsur ” agreement.’ (Emphasis added.) ance We also said there
(p. 355) agreement (Paragraph 20) the rehabilitation
related to the ownership “ultimate status and of the new com
pany.” pointed (a) (Paragraph We then out that subdivision 20) dispose authorizes the commissioner to the stock ac ‘‘any plan adopted
cordance with mutualization thereafter policyholders company, dispo of the and such a new voting plan
sition include a transfer to trustees if the provides.” voting
mutualization so We held that trust
agreement meaning disposal was not a of the stock within the purpose Paragraph agreement 20 of the rehabilitation (p. 358) ‘dispose
and we said that “It is true that the words (a) paragraph
of’ in connec are used subdivision 20
tion authorization the commissioner to with an transfer voting of the trustees in accord stock new
ance with a of mutualization. But it is clear that under provided require subdivision there would transfer carry complete alienation the stock in order out the contemplated (Emphasis added.) therein.” of mutualization validity procedure of the mutualization was not
Again, the upon; only holding being that the rehabilitation
passed
agreement preclude voting creation of trust. did not Co.,
In v. Mut. L. Ins. Cal.2d 386 Caminetti [139 Pacific disqualification judge of a 930], P.2d we were concerned with party’s Mutualization was not con
and a
waiver thereof.
Co.,
Mut.
Ins.
sidered. Caminetti Pacific concerned with the correctness 741], P.2d we were [142 damages al adopted by commissioner
measure disability v. Mut. L. policyholders.
lowed In Garrison Pacific con Cal.App.2d court was 893], Ins. P.2d by the question of claims allowed
cerned with the interest on Cal. Co.,
commissioner. In Mut. L. Ins. Sanborn the fol pointed App.2d 458], the court out date
lowing effective questions were involved: What was agreement company and the insurance between appellant’s Did company?
commissioner as conservator of old date and was notice
present disability prior commence to such agreement?
of claim filed in accordance with the by respondents, however, judgment
It is contended that a validity
upholding the of a contract validity, establishes only against actually made, against the attacks but those made, though question could have been even no
that validity of in- original raised in the proceeding though and even judgment expressly pass does not the contract.
Appellants argue procedure pro- for mutualization statute cannot
vided for be altered contract and that
any attempt against public illegal to do so is policy, and void. *34 true, course, plan
It of mutualization, pro- is as price
posed committee, determination never has been present proceeding.
before the courts until trial
court, 4, 1936, (13) in its order of December “That stated Agreement, Reinsurance
said Rehabilitation and and each and thereof, plan of the terms and conditions and the therein
all are, is, hereby approved; them . and each of . .”
embodied approval only agree-
(Glk. Tr., p. 169.) This was an of the wrong, grossly preclude does not now this and,
ment while correcting plan error from since the mutualization
court nor it it passed upon could have been since was to be
was not years in the future.
promulgated (22 363) “This 344, in the Caminetti case Cal.2d
We said wholly statutory. imposed upon the The duties
proceeding is him supervision over
commissioner, and the vested Appellants, citing Forten- from the statute.”
courts, result 405, 411], Court, 16 407-408 P.2d
bury Superior Cal.2d [106 1936) (December 4, court if of the trial that the order
contend having approved a of mutualization con- as
is considered therefor, is for want statutory provisions it void
trary to the po- subject respondents’ matter. The jurisdiction determined the having previously court is that sition judicata. is In the jurisdiction, the matter res court’s trial jurisdiction originally term said “The
Fortenbury case, we only right
included hear and determine concerning the
subject particular matter in a tendency case. But the modern
has to broaden the meaning, particularly been right where the to review a certiorari, decision or prerogative other writ question is the A may jurisdiction decision. court have the cause action and parties, hut may lack the authority power or to act in except the case particular way. Under circumstances, such generally it is now held that jurisdiction. court pointed had no As out in the ease of
Spreckels S. Co. v. Industrial Com., Acc. Cal. P. 8], frequently ‘the word is used meaning as authority
[199 particular thing do the done, or, putting it conversely, a jurisdiction frequently
want of means a want authority
to exercise in particular power manner a which the board doing tribunal has, in excess authority pos- ’ ” (Emphasis
sessed. added.) We also said in First Industrial Daugherty,
Loan Co. v.
rules and necessary be reasonable or carry purposes provisions out the of this act’ does not power
include to alter enlarge the statute or impair scope.” (Emphasis added.) apparent It involuntary seems if the
provisions for insolvent companies insurance applicable acting commissioner was statutory without authority in
approving of mutualization based the statutory
provisions relating voluntary mutualization of solvent com
panies approval and that his thereof void, as was his
agreement approve plan. such a The rule is settled that a express statutory
contract in violation of an provision is void necessary that it is statute expressly so de (City
clare Oakland v. Const. California 30]). A contract made manner except expressly provided applicable in the ipso statute is facto *35 (Dale Palmer, Cal.App.2d
void v. 106 663, 667 P.2d [235 650]). If legislation review of all the subject on the appears design policy contract to contravene the and laws, (Kreamer the courts it will not enforce Earl, v. 91 735]; Cole,
Cal. 112 P. Inc. 641). Loew's v. 185 F.2d See [27 Cal.App.2d
Hill v. Bank Pedro, San 41 607 P.2d [107 County ; Diego San Water etc. 399] California 175 A.L.R. 747]; Producers, Film Jordan,
Inc. v.
of December was made. The insurance commissioner entirely
says “Presumably provisions go these did not
unchallenged proceedings leading up Order (Emphasis (Insurance commission- added.)
Rehabilitation.” answering brief, p. 61.) company asserts that
er’s New
“validity” agreement put of the rehabilitation in issue by order 4, 1936,
and decided of December approved by appears, From
same has been all that court. question precise here involved has never is obvious that certainly passed upon. passed upon most
been It has been by appellate court, Respondent, an this court. new com- quotations points pleadings from the
pany, following to the showing that original proceeding as the mutualization
in the litigated. paragraph 20(a) were “Answer
provisions of Approval Pro- Interveners to Petition Second
Certain Agreement, 2757-
posed Rehabilitation and Reinsurance Folios Appeal. Transcript on L.A. 16182:
2759 of ‘‘ entirely plan, executed, if void and of That said would binding upon parties thereto, not be effect,
no and would beyond authority of the same is the execution Carpenter, Jr., L. as Insurance Commis-
of the said Samuel California and as Conservator of
sioner of the State of Company Insurance of California Mutual Life [old (cid:127) agreement of said and the and that the execution company], is said Insurance Commissioner
transfer of the assets of the state of
wholly unauthorized the Insurance Code power entirely beyond the of the said Samuel
California and is Con- Jr., Insurance Commissioner as Carpenter,
L. as agreement will be void aforesaid, and the said
servator beyond power of the Insurance Com-
when executed provided cases made and
missioner under the such statute binding agreement is of no effect whatever
and that the said any pursuant and that acts done parties on thereto ’’ wholly null and void.
thereto Inter- Complaint in Intervention of Certain
“Amended Transcript Appeal, L.A. 16182:
veners, 3882 of Folio beyond agreement the au- approval said
“That and, given, if would jurisdiction of this court
thority and authority effect, for the reason that of no force and
be void and given in, and, fact, by, is forbidden
therefor is not California, Insurance Code provisions of said
terms and chapter particular, of articles is
and, in [sic] 1 thereof.”
part of division
759 It me what appears undoubtedly that was meant pleadings organization
these was that beyond power
was said to be the commissioner’s since that Carpenter major
was
issue in
v.
Mut.
Ins.
L.
The arises is whether or next that not the litigated
visions for mutualization could have been in that
proceeding place inasmuch as mutualization was not to take long
until between “so as the Conservator Liquidator Company
or a may the Old continue hold
or all of (Paragraph 20(a), said stock. ...” rehabilitation proposed voluntary The
agreement.)
also to be in “with accordance the laws of Cali- State request.
fornia effect at the time said ...” The proposed price
was also to be not unless the determination “shall opinion
committeee determine whether in their
proposed voluntary mutualization of New . Company . . practicably
can accomplished. then be ...” v. Silva City County & Francisco, Cal.App.2d San 784 [198 county 78], supervisors passed P.2d a board a resolution plaintiff’s acquired
that certain land of should be when neces-
sary. sued for Plaintiff a declaration as the value his
property. court, refusing place plaintiff’s valuation property, declared: “The judicial court take
knowledge that real estate values do not remain constant. during present
The value fixed period may dispropor- paid
tionate to what should depart- when the recreation city
ment of the property part decides use as a
‘playground.’ Plaintiff seeks a final determination that
property $10,000 is worth and that defendant when if property chooses to take the this will be the it amount must pay.” (Emphasis court.) that It was also said that
“. . . present complaint alleges in substance that property may through
value be determined condemna- proceedings
tion ‘necessary.’ when it defendant deems
only declaratory judgment that be rendered under the could
allegations complaint advisory would be of an nature—
namely, necessary when defendant deems it to institute proceedings price
condemnation be fixed at the then (Pp. 788-789.)
market value.”
In Young Young, Cal.App.2d 85, 25],
it that an foreign was held action to establish a decree of California,
divorce in ratification the California
court of property foreign a settlement included de- controversy in the present justiciable absence
cree, did comply showing had refused or failed to defendant property foreign or the terms of the settlement decree
with the ‘1 accurately agreement. The rule is stated was held that It (1921) page 335, Jurisprudence at section California ‘ jurisdiction of a justice, court To invoke the follows: genuine there be involved primarily essential *37 calling adjudication in controversy, present as existing ’ rights. (See Refining v.
volving present also Neill Five C. 191 P.2d Mr. 818]), wherein Justice Cal.App.2d 79 [179 page 193, at ‘An action pointedly states the rule
Drapeau thus controversy, prosecuted “for an or founded actual
not curiosity litigants” is collusive gratification of the ’ ” [Citing not be entertained. and will cases.] 89], P.2d Merkley 543, 12 Cal.2d 547 Merkley, In v. [86 ‘‘ present an academic in the record that facts
court stated discretionary only. question The courts will not exercise the give present a rights do rise to
power which not to declare ’’ controversy. County Diego v. Water etc. Co., In San 30 Cal. California 124, 175 A.L.R. 823, 747], 826 P.2d a 817,
2d case involv [186 county to relocate agreement county
ing highway, an following Legislature rule: That if we had enunciated county city might or
provided a method abandon method was roads,
or that exclusive. We said: “It vacate n however, that neither the doctrine of clear, estoppel nor is may principle equitable against be invoked a govern any other operate body it would defeat the where effective
mental adopted protect public. policy (See of a
operation McKinnon, 83 34, 20 Cal.2d v. A.L.R.
Miller therein; Pan cited American Petr. Transp. cases &
570], and 456, U.S. 505-506 States, S.Ct. United
Co. Surety N. 734]; Co. Y. v. American United
L.Ed. States 903, 906.) Surety 112 F.2d the American (C.C.A. 10th), government stated that the the court could not
Company case purpose ‘frustrate its laws or estopped so as to thwart F.2d, 906.) (112 p. MeQuillin, at In 3 policy.’ public ed., 1943], Corporations section said
Municipal is [2d statutory procedures steps protect or exist to citi various that from taxpayers ill-considered contracts or those show
zens and recovery property that if is allowed for or
ing favoritism estoppel implied ground contract, or on the ‘then
services night day as the statute charter
it follows naught. always evaded and set at
provision can denying
author adds that the rule indirect enforcement governmental
such -voidcontracts harmonizes with our system,
appears supported by to be reason, and is unjust, because party charged
the other with notice the law.” any rate,
At of mutualization, distinguished provisions
from the for mutualization as found in the re- agreement,
habilitation upon. has case, never until this passed been plan, following
That while the outline contained
Paragraph (a) years prior made promulga- some to the
tion of the one consideration, here under entirely is an dif-
ferent matter properly be held void as not statutory
accordance with the for involuntary scheme mutual-
ization of companies insolvent insurance seized the com- provisions
missioner under the of sections 1010 and 1011 of the Insurance Code. The rule enunciated in County San
Diego v. Water Co., supra, etc. hereinabove set California forth applicable would be if of mutualization is held against public
void as policy being and as in excess of the jurisdiction.
commissioner’s
It should be Paragraph noted 20(f) pro- contains a
vision to the effect if all, part, of the paragraph *38 contrary
should be law, illegal, or void, or the vulnerable provision should separable be deemed and the balance of the agreement should If, stand. as I believe, validity the Paragraph 20(a) has determined, never been before pro- the just
vision prevent noted anything would that has been here- by
tofore any determined either court, appellate this or court,
from conflicting with the determination made here.
Trial De Novo procedure
If the involuntary for mutualization had been
followed, as been, question it should have would never (cid:127) have arisen. Section 1048 of the provides Insurance Code
that after the formulation the mutualization plan, it by
“shall” be submitted the commissioner to the court for approval.
its import procedure clear outlined
for organizations insolvent possessed is property that those
rights in protection them must be accorded court every at stage. For example, appoints appraisers the court
(§ 1051). required by Such approval, court 1048, section ac- parties
cords the equivalent interested a trial de novo.
According majority to the opinion, the “alternative” reason
given for affirmance upon is reliance the doctrine res
judicata. patently by That this reason is false is shown Mr. points that the court “could Traynor when he out
Justice
obviously plan time entered its approve at the not [the] agreement. Moreover, it approving
order the rehabilitation carrying out of in expressly approve
did not advance price might by the presented mutualization ’’ He there is reserved to determination committee. shows that ap- jurisdiction to by agreement, continuing court, in plans developed or future
prove disapprove in hands disposal or stock other interpret order He so points
the commissioner. out that to 1037, subdivision primary purpose of section
subserves by securing
(d), of to all interested the Insurance Code Appellants right scrutiny.” have not
parties “their to court scrutiny” in
been “court its true sense. accorded order of the com
Appellants correctly contend subject approving
missioner mutualization was argued It judicial superior
full court. review the judicial commissioner, making order, his acted legislative capac or
capacity rather than an administrative
ity Appellants that in respondents. contend as contended
reviewing or order of a statewide administrative a decision reweigh
agency officer, superior court must of'a state inde according to its evidence and determine itself supported
pendent the decision is judgment whether every preponderance of weight or the evidence case rely They judicial involved.
where state functions 501, Emp. Com., Thomas v. Cal.2d Stab. California ; Examiners, v. Board Medical P.2d Moran [247 561] ; Cal.2d P.2d Laisne v. Board State 20] California ; Optometry, 19 834-835 P.2d 457] Embalmers, Funeral Drummey State Board Directors & v. Respondents, hand, the other Cal.2d 75 [87 848].
argue order an exercise of execu commissioner's judicial power of such full
tive and was not the exercise court exercise
power appellants entitle to have the trial independent weight of the judgment respect to the Respondents rely upon Italy eases
evidence.
Bank of
784];
P.
Johnson,
v. 13 A.L.R. Goodcell, Cal.2d 741 P.2d [91 Racing Jockey Club, etc. Southern Inc. v. California Calif. Board, P.2d 36 Cal.2d [223 1]. in section commissioner,
The duties the as set forth held minister of the court
12921 have been to be “that of a of conserving property, -to the end the possession
in everybody having any (H. interest” D. Roosen Co.
rights v. 873]) Co., Cal.App. P.2d Radio Pub. discretionary Cal.App.2d 649, (Garris Carpenter, v. in 688]). Guaranty P.2d It was held Caminetti 423], Union Ins. 22 Cal.2d 764 [141 Life . . perform
the commissioner’s “. office is not to functions controversy jurisdiction
in to decide be aid the court’s statutory officer, subject litigants, he acts as a how
tween but judicial prevent arbitrary supervision
ever to an exercise neglect duty.” in power the Caminetti court
case, however, referring to was the commissioner as a re companies of insurance
ceiver assets stated that power court,
he did not derive from from his but
statute. upon by
The distinction in the two lines of cases relied
appellants in respondents upon by is that those relied
appellants existing property right an vested extinguished, away, taken example, the administrative order. For (13 Drummey Drummey
in 75) case and Wilson duly been
had embalmers and licensed the State Board of
Funeral Directors Embalmers their ordered licenses sus-
pended. dealing This held that court it was with a statute fact-finding powers
which on conferred certain a board exer-
cising jurisdiction statewide and that there was no “indica- legislature
tion that so intended facts found to be
binding courts”; no method of pro- review was
vided the statute. We held that we could see no escape proceeding
from the conclusion such a the court to application mandate is weigh made must evidence, independent judgment and exercise its on the facts law, complaining
as well as the if party is to be accorded rights
his constitutional under the state and federal Constitu- provision
tions. “The state constitutional discussed, supra,
prohibits judicial conferring power on such administra- 84). (p. boards”
tive In Laisne v. Optometry, State Board supra, California
the California of Optometry State Board had revoked Laisne’s of registration practice
certificate optometry in this state.
We held authority Drummey there that “On case only type appellant of review that would afford his full rights
constitutional complete would be a trial de novo as 843.)
outlined (P. decision that case.”
In Moran v. Examiners, Board Medical supra, State
764 of Dr. Moran
Board of revoked the license Medical Examiners We held practice in this state. “That the trial medicine 1 by law to its in in case was authorized exercise court is
dependent judgment on the evidence’ well established. 21 (1943), Examiners Cal.2d (See Dare v. Board Medical 22 ; Cal.2d
790, Sipper (1943), 795 P.2d v. Urban [136 304] ; (1947), 141 v. 81
138, P.2d Hohreiter Garrison 425] [137 323].) As Cal.App.2d 402 P.2d stated the last 384, [184 ‘ case, page 402, Thus, power ultimate of decision cited at ’ ” 308.) (P. court.
rests
the trial
Emp.
vided deprived rule
property rights persons as to fall within statutory by agency property rights administrative were superior de novo in the
entitled to a limited trial court. (which
Respondents’ position adopted by has been in toto is majority opinion) that the “Order” of the commis merely “permit” which was allowed mutualization
sioner (§ 11526, policyholders (d)) so voted subd.
if the anyone rights. deprive property vested
the order did not
(Thomas
held
v.
Emp.
have heretofore
We
Stab.
California
;
Com.,
501,
P.2d
Laisne v.
39 Cal.2d
[247
561]
California
Moran v. Board of Drummey 20]; v. Board Funeral P.2d State Directors [196 848]) Cal.2d 75 P.2d Embalmers, 13 that where an
& right extinguished by
existing questioned ad property deprived one order the so is entitled to a trial
ministrative Appellants superior novo in court. here are the bene
de company new owners of the stock which is held
ficial proposed for their benefit.
by voting Under the trustees they plan, this stock will be nonexistent accept price therefor, as well as terms, be forced to
will Tray- no they have exercised control. Mr. Justice
over procedure proper if pointed has out that had been
nor people pro
followed, rights these would have been subjected law, rather than to the action a court
tected positions. acting three irreconcilable
of one man company transferred were old new assets company which, exchange for all the stock commissioner, held as conservator
beginning, creditors, policyholders, and stockholders benefit of the Mut. L. Ins. company (Caminetti
old 908]). the stock of new Later, legal voting thereto,
was transferred who held trustees title power rights ownership.
“. . . with the to exercise all the commissioner, however, beneficial in retains entire
terest the benefit of creditors of the old (22 page 357.)
others interested.” Cal.2d, at As stated opinion (page
the insurance commissioner in decision his ‘1Greatly the exhibit): epitomized, mutualiza [of *41 Non-Par Participating determined that both the and tion]
ticipating company Life of be mu Departments should the by purchase all
tualized standing the cancellation the out and of of capital Company, shares stock thus the New of of converting con Company the New insurer into non-stock policy
ducted the benefit of its members who shall be the
holders of participating non-participating the life and
classes.” purchase Inasmuch as and the stock cancellation company new accomplished by proposed will mutu be the
alization, appears deprived, by it appellants have been order, of their ownership vested beneficial of that stock
so as to entitle them to a the rule trial de novo within
cited cases.
The majority opinion the mu- approval states: “The plan by
tualization not involve commissioner did deprivation of property rights rights; or vested it was
essence permit authorizing company license new purchase its own company stock.” would This be true new if
members fallacy owned their (and own stock therein lies the
in calling new corporation a solvent with all that
term connotes). quite simple. But the All matter is not so
the beneficial ownership, ownership real held which is the is policyholders company; stockholders old all legal title voting is held (appointed trustees
the commissioner) policy- of old benefit
holders and stockholders. In words, other holds legal
neither nor beneficial ownership through of its stock, but
the medium of the mutualization given right is deprive the beneficial property owners of their in clear vio-
lation the law propounded by as heretofore this court.
We held in Drununey case that we escape could see no
from the conclusion that the weigh court must the evidence
and exercise independent judgment on the facts as well law, complaining if the party towas be accorded his rights
constitutional under the state and federal Constitu-
tions. provision “The state constitutional discussed, supra, judicial administra-
prohibits conferring power on such ’’ tive boards. States, 298 U.S. Joseph Stock Yards Co. v. United St. “Legis 1033], 80 L.Ed. the court stated: S.Ct. [56 agencies, in a field varying qualifications,
lative work expert
peculiarly political Some exposed to demands. It is difficult for impartial, others subservient. not requirements giving hearing
them to of law observe the findings of receiving say But their evidence. rights may be constitutional
fact made conclusive where liberty property involved, although the evidence are
clearly findings wrong are and constitu establishes that rights place rights invaded,
tional have been is to those at mercy seriously impair administrative officials safeguards. pros security judicial in our That inherent multiplication agencies, is
pect, with our administrative regarded. lightly one to It is said can retain that we
judicial authority weight evidence when to examine the liberty. question personal But right if concerns so, it privileged perform not because we are
this be our
judicial duty for reasons in that case and of convenience to rights
disregard principle applies when in others. The property protected by persons or constitu either of system
tional our there is no warrant for restrictions. Under *42 judicial power competent view a court can that arrangement by any legislative designed
be circumscribed to going beyond
give effect action to administrative limits authority.” (Emphasis added.) This constitutional ease upon by Drummey were relied us in the this statement
and 75, 85) and no (supra,
case 13 Cal.2d information has been rule me to that the there
presented to show set forth has any way changed. clearer No case than this
been could be found to illustrate the evils be avoided.
possibly Old policyholders been, and are, stockholders have officials; administrative “mercy”
at the those officialsmay, years, either
during “expert 10 have been last im
partial” “subservient.” length forth at
I have heretofore set the self-evident fact possessed rights appellants property are of vested
that deprived. they being Valley In Ohio Water Co. v.
which Borough, 287, 527, 253 289 64 L.Ed.
Ben Avon U.S. S.Ct. [40 prescribed “The here order involved
908], it was held: legisla of maximum future rates and was
complete schedule Co., 211 Prentis Atlantic Coast Line R.
tive in character. v. 767 Erie W. ; 210 53 L.Ed. R. 67, Lake & S.Ct. U.S. [29 150] 424 Com., 422, 249 S.Ct. v. State Public Utilities U.S.
Co. [39 con such owner claims 345, cases, 63 L.Ed. In all 684]. if provide must result, will property his the state
fiscation judicial tri submitting that opportunity issue fair judgment independent its own bunal determination is void otherwise the order because as to both law facts: process amendment. clause, with the due conflict fourteenth 340, Ry. Tucker, Pac. v. 230 347 S.Ct. Missouri Co. U.S. [33 Ry. Georgia, Wadley Co. v.
961, ; 57 L.Ed. Southern 1507] ; Missouri 651, 660, 214, 59 L.Ed. 235 U.S. S.Ct. 405] [35 Q. 715, Chicago, Co., B. S.Ct.
v. & R. U.S. Love, 252 ; Operating v. U.S.
60 L.Ed. Oklahoma Co. 1148] added.) (Emphasis 338, 64 S.Ct. L.Ed. 596].”
Appellants complain bitterly here because the mutual plan provides price
ization paid for new com pany’s (of they stock are the owners) is beneficial
$3,000,000 while same originally that amount was taken out company’s purchase company’s old funds and, stock addition, all the other assets of company (over $200,- old
000,000 plus intangibles assets going agency such or
ganization good concern, will, etc., several mil “worth [Carpenter
lions dollars” L. Mut. Ins. (74 761) ]) were turned over to new com surely crystal It
pany! everyone must be clear to who can outrageous
think that such an property confiscation with process due place
out law has never taken before in this
state.
Evidence In the trial court the evidence consisted all of the record proceedings before insurance commissioner, con-
sisting reporter’s daily transcript, the exhibits and Appellants they commissioner’s decision. contend prohibited introducing evidence, offering from
were rulings court; so,
do because of the of the trial that no issues litigated;
of fact were the court that it ruled was not
empowered independent judgment exercise on the evi- taken Respondents
dence before the commissioner. state
appellants given were leave to serve file a motion and
affidavits relative to introduction of additional evidence *43 failed do The
and so. memorandum opinion and order
(July 2, 1951, Tr., 237-239) Clk. this contains statement: study
“After a careful of the briefs submitted and the au- that, I come far
thorities cited have to the conclusion so
any matter of is Court limited to de- concerned, fact this is
termining findings not whether or the Commissioner supported by are whole light substantial in the evidence but record, independent that it this is court to exercise its for
judgment Agreement in interpreting the Rehabilitation construing applying 11527 of the Insurance section ...
Code. have to the further conclusion that this Court
“I come evidence, upon proper additional but that
cannot receive
showing remand this to the Commissioner matter to take light reconsider the case
further evidence and of such
evidence. ...” made by judge to the statements the trial point
Appellants findings very “I think must that it settlement to decide on question had this case a new had I evident if opposite” might (emphasis been the my have decision of fact Tr.) [fixing price] “It Eep. is
added; page making you complex. I think more complex,
very my that basis of determination was finding was, and
My had a reasoned determination they price committee] [the That the fact. If fixing price. they is had acted
basis to set I would have had
unreasonably then it aside. It was myself not convince that it not a
only I could was because they acted that I ever decided
rational conclusion way I not I did. Because could take the
the case the facts by long not But conclusion; shot. because at the same arrive su,bstitute my opinion theirs, I could Í not did feel my opinion Commissioner’s, that or substitute that I I But that is reason arrived at conclusion did. they you it. not the took in. What
crux of It is details entirely evidentiary.” now is (Emphasis find
are entitled to
added.) from obvious—that The inference this is had the in-
voluntary followed, been the court procedure would have approval protect because the did
withheld its owning the beneficial
interests those interests. by the statement made trial just-quoted shows, court equivocation, that had there been a trial de novo
without contrary have been would that reached. His
his decision that he convinced that weight shows was
statement appellants but, believing himself limited
evidence rule, evidence his the substantial conclusion was favor only conclusion respondents. rational drawn from appellants case is that possessed
the facts were of a *44 therefore, given have right and, should been property
vested judicial provided by the in tribunal state trial de novo rights. appel- private property Because protection the they de- not afforded a trial de novo have been
lants were
prived process of property guar- of their without the due law by them
anteed to both the state and federal Constitutions.
Summary Major Points
(1) my opinion It is provisions of the Insurance
Code relating voluntary mutualization of solvent insurance
companies applicable company. were not to new As I have pointed out, company
heretofore new organized was because insolvency the company of old and cannot be considered company a solvent until the arising liabilities from the policies paid
non-can have been or sufficient funds accumu- pay
lated to them. voluntary provisions mutualization the code and of they themselves show were intended
by Legislature apply only not a solvent
but to a company closely supervised not so the commis-
sioner as the one ordinary here under consideration. The hybrid
solvent is not such a as we have new company. In using voluntary procedure, we have the
commissioner, acting as conservator and beneficial owner company, stock of new agreeing to plan vote for the proposed by
mutualization as the price determination com-
mittee. As conservator, and beneficial owner of the stock of company,
new he supposed is to be protecting rights
interests of position those appellants. When, as
commissioner, he approves proposed plan as fair and
equitable, voluntary under the procedure, he is
concerned the fairness of the as it concerns those company.
interested If the normal solvent mutualized, being
were of mutualization would be
proposed company itself, approved by its board of
directors, adopted by a majority vote of its own shareholders, approved
and then who, the commissioner presumably, plan,
would not have seen the prior even of it, heard presented time was to him for his approval as fair equitable to those concerned—the policy- shareholders and
holders of company. the solvent following statement is in the majority opinion: found
“In numerous eases where action of an administrative necessary prevent officer was the statutory scheme, defeat of
his participation upheld although has been grounds than those raised
disqualification were more much serious again too (Emphasis added.) The author assumes
here.” being “statutory He scheme”
much. assumes being contrary, statutory scheme is
carried out. On of insolvent The entire scheme for rehabilitation
defeated. statutory corporations, protection of the interested therein, abrogated
persons through procedure the use of the
designed corporations. for mutualization of solvent Paragraph 20(a) opinion I also of
(2) am judicially agreement has never before been
rehabilitation provisions judicata therefore, res and, determined *45 pointed I there is controversy. have out that present agreement and that in the rehabilitation
a clause separability this, appellate court, by or will done an
nothing heretofore parties may by that the holding a this court by
be affected company contrary validly to mutualize
not contract statutory provisions. applicable
the superior a trial de novo the have been
(3) There should the method to proper evidence relative to where
court committee, court-appointed or price by
used determination by and a have introduced both sides appraisers, could been by judicial appel- trier of fact. Both made
determination many pages their nu- respondents here devote
lants and obviously material. Such methods
merous briefs such experts in and for the field insurance should be
matters subject testimony in the trial court. firmly believe, procedure involuntary for If, I
(4) as companies proper procedure, is the insolvent
mutualization 1051 and 1052 the Insurance Code 1049, 1050,
sections appointment for and the provisions hearings
contain detailed
by appraisers appraise outstanding “the court then capital regard insurer, stock- such without
shares depreciation arising out of
any appreciation or said mutualiza- appraisement modified. approved
tion so Such shall as capital stock,
fix of such the reasonable value shares in- any, if
cluding goodwill, insurer, such and shall state any, assigned to such value, goodwill; if and if the such no
appraisers goodwill, have found that insurer has shall finding appraisement, shall stated. Such
such when con- court, (§ 1051.) shall be final and conclusive.”
firmed said involuntary procedure
The use of the mutualization for an logically pro- from original follows
insolvent and It
ceeding sections 1010 1011. under should be noted Insolvency (still Delinquency under
that section and insurer, mutualization,
sections) provides that: “Such after original insurer, shall be a and such mu- continuation of existing suits, rights
tualization or contracts shall affect except approved. provided as as said
Such insurer, rights shall all the mutualization, after exercise powers
and perform imposed all the duties conferred law writing insurers classes of insurance written
by it, protect rights existing prior and to and contracts subject
mutualization, the effect said mutualization
plan.” (Emphasis added.) Carpenter We held in Mut. L. Ins. 307, 334 761], “reinsurance” was contract (new company) one takes over the in-
surance company (old risks of another company) and becomes
substituted insurer place original an in the stead of the
insurer. holding This logical is also following result of procedure Insolvency outlined in Delinquency
division of the Insurance Code. Traynor Mr. Justice has said in his
Prom what dissent by me, set forth reasons heretofore the con- inescapable judgment
clusion is should be reversed. SCHAUER, generally I concur in the discussion, . J
reasoning Mr. conclusions of Justice Carter.
Appellants’ petition rehearing July was denied *46 J., Carter, Traynor,
1955. J., Schauer, J., were
opinion petition granted. should