State v. Firemen's Insurance Co.

The opinion of the Court was delivered by Mr. Justice Carter. This suit, instituted by the State of South Carolina against the defendant, Firemen’s Insurance Company of Newark, N. J, in the County Court for Richland County, August 2, 1928, has for its purpose the recovery of the sum of $500.00 as a penalty under the provisions of Sections 4090 and 4092 of Volume 3 of the Code of 1922. The case was brought to trial in the said Court for Richland County January 8, 1930, before Hon. M. S. Whaley, presiding Judge, resulting in an order of nonsuit, from which order the plaintiff has appealed to this Court. For a clear understanding of the issues involved we quote herewith the complaint in the case: Compeaint “The plaintiff, complaining of the' defendant, alleges: “1. The defendant, above named, is a corporation engaged in the business of writing fire insurance, duly chartered and organized, and licensed as a foreign insurance company to do business in this State; subject, however, to the laws of the State and to the penalties prescribed for the violations thereof. “2. On or about the 31st day of May, 1928, the defendant willfully violated, and failed to.observe and comply with, the provisions of Section 4090, Code of 1922, Vol. 3; the said violation being in manner and form as follows, to wit: The defendant, having full knowledge of the fact that the insürance agency licenses issued to the members of the H. C. *316 Flicks Agency, Spartanburg, S. C., had expired on March 31st, 1928, and had not thereafter been renewed by the Insurance Commissioner, nevertheless continued, in deliberate and willful violation of the statutory requirements relating to the operations of insurance agencies, to do business and to write, or cause to be written, policies or contracts of insurance, and to have the policies countersigned and issued, by and through the said FI. C. Hicks Agency, although knowing the said agency and the members thereof, to be unlicensed and not regularly commissioned to transact the business of insurance in this State. The defendant, acting by and through the H. C. Hicks Agency as aforesaid, issued, as of the date mentioned, a policy of insurance to B. R. Bittlejohn, on property located in Spartanburg County, in the State of South Carolina. “3. By reason of its willful violation of the laws of this State, as above set forth, the defendant has become subject to, and is liable to pay, under the provisions of Section 4092, Code of 1922, Vol. 3, a penalty of Five Hundred and no/100 ($500.00) Dollars, to be collected and recovered in an action brought in the name of the State. “Wherefore, the State of South Carolina prays judgment against the defendant, Firemen’s Insurance Company of Newark, New Jersey, for the sum of Five Hundred and no/100 ($500.00) Dollars, and for the costs and disbursements of this action.” The defendant, by its answer, denied the allegations of the complaint. The Section 4090 of the Code of 1922, referred to in the complaint, reads as follows: “(4090) § 37. All Policies to be Issued Through Resident Agents — Receptions.—No fire insurance company or association not incorporated under the laws of this State, authorized to transact business here, shall make, write, place, or cause to be made, written or placed, any policy, or contract of insurance of any kind or character, or any general or floating policy, upon property *317 situated or located in this State, except after said risk has been approved, in writing, by an agent who is a resident of this State, regularly commissioned by the company -doing business in this State, who shall countersign all policies so issued, and receive the commission therein when the premium is paid, and the State shall receive the license fees required by law to be paid on the premiums collected for insurance on all property located in this State. Nothing in this chapter shall be construed to prevent any insurance company or association, authorized to transact business in this State, from issuing policies at its principal or department offices, covering property in this State: Provided, That such policies are issued upon application procured and submitted to such company by agents who are residents of this State, regularly commissioned to transact the business of insurance herein, and who shall countersign all policies so issued and receive the commission thereon when paid. No provision of this Section is intended to or shall apply to direct insurance covering the rolling stock of railroad corporations or property in transit while in the possession and custody of railroad corporations or other common carriers.” Section 4092, Vol. 3, of the Code of 1922, referred to in the complaint, reads as follows: “(4092) § 39. Penalty for Violation of Provisions.— Any insurance company or association willfully violating or failing to observe and comply with any of the provisions of Sections 36, 37 and 38 applicable thereto, shall be subject to and liable to pay a penalty of five hundred dollars for each violation thereof; and for each failure to observe and comply with any provisions of the said Sections, such penalty may be collected and recovered in an action brought in the name of the State, in any Court having jurisdiction thereof. Any insurance company or association which shall neglect and refuse for thirty days after judgment in any such action to pay and discharge the amount of such judgment, shall have its authority to transact business in this State revoked by the Insurance Commissioner, and such revocation shall *318 continue for at least one year from the date thereof; nor shall any insurance company or association, whose authority to transact business in this State shall have been so revoked, be again authorized or permitted to transact business herein, until it'shall have paid the amount of such judgment, and shall have filed in the office of the Insurance Commissioner a certificate, signed by its president or other chief officer, to the effect that the terms and obligations of the provisions of this Article are accepted by it as a part of the conditions of its right and authority to transact business in this State.” For the purpose of showing the proceedings in the trial of the case, we quote from the transcript of record the following : “Testimony was offered by the plaintiff, in substance, as follows: “The defendant admitted its issuance of the policy in question through the H. C. Hicks Agency in Spartanburg, South Carolina; and that the policy was countersigned by A. R. Coleman, as agent. “It is admitted by plaintiff that Coleman was a resident of the State of South Carolina; and also that the defendant, Firemen’s Insurance Company, as far as they were able to do so, had commissioned him as agent to write insurance. In this connection, the plaintiff’s position was stated to the effect that Coleman was not authorized to act as agent under the State laws and, on that account, was not duly commissioned to write insurance. “Sam B. King, Insurance Commission, was called as a witness for plaintiff. He testified that he had assumed office as Insurance Commissioner on April 2, 1928, succeeding Mr. John J. McMahon, and that he did not commission the H. C. Hicks Agency or any member of that agency; that he did not issue a license either to H. C. Hicks or A. R. Coleman. “On objection by defendant to testimony concerning the issuance of the license by the Insurance Commissioner, the *319 positions of the defendant and plaintiff were stated, respectively, as follows : “Mr. Shand (for the defendant) : We object on the ground that this is a suit for penalty under Section 4090, Vol. 3, of the Civil Code, 1922. The violation charged in the complaint is, that the defendant, having full knowledge of the fact that the insurance agency licenses issued to the members of the H. C. Hicks Agency, Spartanburg, S. C., had expired on March 31, 1928, and had not thereafter been renewed by the Insurance Commissioner, nevertheless continued, in deliberate and willful violation of the statutory requirements relating to the operations of insurance agencies, to do business and to write, or cause to be written, policies or contracts of insurance, and to have the policies countersigned and issued by and through the said H. C. Hicks Agency, although knowing the said agency, and the members thereof, to be unlicensed and not regularly commissioned to transact business of insurance in this State. And the complaint goes on and states that the agency issued this policy. “Now, it is admitted by the defendant that the policy described in the complaint was issued by the defendant through the H. C. Hicks Agency of Spartanburg, on May 31st, 1928, and countersigned by A. R. Coleman, a resident of South Carolina. “It is admitted by the plaintiff that the agent countersigning this policy was a resident of South Carolina, and commissioned by the defendant, Firemen’s Insurance Company. The section with which this defendant is charged with violating, Section 4090, provides that no fire insurance company shall write any policy on property in this State except after the risk has been approved by an agent who is a resident of this State, regularly commissioned by the company doing business in this State, who shall countersign all policies so issued. “As the agent who countersigned the policy in this suit was a resident of this State, regularly commissioned by the defendant company, the fact that he was not licensed by the *320 State, if that be so, would not constitute a violation of Section 4090, and Section 4092, which provides for the penalty, and under which this suit is brought, specifically provides that ‘any insurance company willfully violating or failing to observe and comply with any of the provisions of Sections 36, 37 and 38 (Sections 4089, 4090 and 4091 of the Code), shall be subject to and liable to pay a penalty of $500,007 “The defendant, therefore, objects to any evidence as to whether or not the defendant’s agent in this matter who countersigned this policy, was not licensed as an agent by the Insurance Commissioner, as the only requirement of that Section 4090, is that he be regularly commissioned by a company doing business in this State and that he be a resident of this State. “Mr. Whiting (for the plaintiff) : Our position, your Honor, is that under the statute, Section 4090, a resident agent who writes policies must be a duly commissioned agent under the laws of this State; that he cannot be a duly commissioned agent except by reason of a license issued to him by the Insurance Commissioner; that no company can commission as its agent in this State any man who, in order to do the business of the company, would act unlawfully under the laws of this State. It must be such a person as is recognized by the Insurance Department under the laws of this State, and therefore, must be licensed to do business. The two things are conjoint — the commission by the company and the position of the agent as qualified under the laws of this State, to represent the company in the State.” Following the statement of counsel, as above set forth, the Court ruled that the statutory provision under which the case was brought was not applicable and had nothing to do with the licensing of the agency through which the policy in question had been issued. After this ruling by the Court, for the purpose of the record for appeal, subject to the stated objections by defendant’s counsel and the said ruling by the trial Judge, the plaintiff introduced testimony in the case *321 on the question of the said alleged willful violation of the law by the defendant in issuing the said policy through an agent or agency not licensed or authorized under the law of this State. Upon the close of the introduction of the testimony, introduced as aforesaid, counsel for the defendant moved for a nonsuit upon the following grounds : “The defendant asks for a nonsuit in this case on the grounds that the complaint in this action was brought for violation of Section 4090, Volume 3, of the Civil Code of 1922, in that the policy in question was written by an agent who had not been licensed by the State of South Carolina. The penalty sought is under Section 4092, which provides that the penalty shall apply only in the case of the violation of Sections 4089, 4090 and 4091. The evidence before the Court shows that the agent who countersigned the policy in question was regularly commissioned by the company and was a resident of South Carolina. This is the only requirement of Section 4090, and the fact that he was not licensed by the State does not constitute a violation of Section 4090. Under the terms of Section 4092 the penalty is, therefore, not applicable to the violation charged in the complaint.” Following this motion the trial Judge ordered a nonsuit upon the grounds presented, and ruled that the testimony offered by the plaintiff was irrelevant and ordered it stricken out. From this order and holding of the trial Judge the plaintiff has appealed to this Court. Under the view we take of the case it will have to be remanded for a new trial and for that reason we shall not discuss the force and effect of the testimony offered by the plaintiff. We state, however, that in our opinion the proposed testimony was competent to go to the jury on the question of fact involved. Appellant’s specific allegations of error imputed to the trial Judge are as follows: “1. His Honor, the trial Judge, erred in excluding and holding irrelevant: “(a) The proposed testimony of plaintiff’s witness, Sam B. King, and; *322 “(b) The correspondence offered in evidence by plaintiff.” It is respectfully submitted that such testimony was competent and relevant as tending to show a willful violation of the insurance laws of this State, within the statutory provisions under which this action was brought. “2. His Honor, the trial Judge, erred in holding that it was not a violation of the provisions of Section 4090 for the defendant company to transact the business of insurance in this State through an unlicensed agent. It is respectfully submitted that an unlicensed agent is not a resident agent regularly commissioned within the meaning of such statute. “3. His Honor, the trial Judge, erred in-granting a non-suit. It is respectfully submitted that the proof offered in the case tended to show a willful violation of the insurance laws of the State as charged in the complaint.” For the reasons stated above, exception 1 is sustained. Exceptions 2 and 3 will be considered together. In accord with the position taken in the lower Court, it is the contention of respondent, briefly stated, that whether or not the defendant’s agent, Coleman, was licensed by the Insurance Commissioner of South Carolina, has no bearing on the case for the reason that the suit is for the violation of a specific section of the Code, Section 4090, and that that Section does not require that an agent be licensed “but only that he be a resident of the State and regularly commissioned by the company.” While the respondent concedes, as we understand its position, that the law of this State requires each agent writing insurance within the State to procure from the Insurance Commissioner a license, paying therefor the required fee, it contends that that burden or duty is, under the statute, upon the agent, and contends, further, that “there is nowhere in the statutes a provision requiring a company to write policies only through licensed agents.” In connection with this view respondent calls attention to the general rule that the Section 4090 of the Code under *323 which the penalty is sought to be collected is a penal statute and must therefore be strictly construed, and under this rule the respondent contends that it can in no sense be made to respond under this action. In support of this position the following authorities, among others, are called to our attention by the respondent: Hall v. Norfolk & W. R. Co., 44 W. Va., 36, 28 S. E., 754, 41 L. R. A., 669, 67 Am. St. Rep., 757, 25 R. C. L., 859, 1083 and 1086; Aylsworth v. Curtis, 19 R. I., 517, 34 A., 1109, 33 L. R. A., 110, 61 Am. St. Rep., 786. While generally speaking there is no doubt of the correctness of the principle stated under .these authorities as to the rule applicable in construing a penalty statute, in construing Sections 4090 and 4092 of the Code under which this action is brought it must be kept in mind that there are other provisions of the Code to be considered, which are pertinent provisions of the insurance laws of this State, as follows : “(4068) § 15. Affidavit to be Filed. — Before issuing a license to any company to do business in this State, the Insurance Commissioner shall require in every case that each such company shall file with him the affidavit of its president or chief executive officer so as to bind the company, that it has not violated any of the laws of this State, and that- it accepts the terms and obligations imposed by the laws of this State as part of the consideration for such license.” “(4069) § 16. Agents to Obtain License from Commissioner. — Before doing business in this State for any insurance company or association, each agent shall procure from the Insurance Commissioner a license for which he shall pay one-half dollar as an annual department license fee. Before issuing such license the Insurance Commissioner shall determine that the agent is a fit and proper person. Such license shall expire on March 31 of each year. The Insurance Commissioner shall have power to revoke said license after thirty days’ notice and examination whenever it shall appear that said agent has violated the laws of this State, or has willfully deceived or dealt unjustly with a citizen of *324 this State: Provided, That agents under bond may commence work upon notice and application for license, being mailed to the Insurance Commissioner. Copies of all forms of policy contracts issued by companies or associations licensed to do business in this State shall be filed with the Insurance Commissioner.” “(4072) § 19. Insurance Companies to do Business Only Through Authorized Agents — Commission—When License may be Revoked. — That it shall be unlawful for any insurance company doing business through agents in the State of South Carolina to write, place or cause to be written, placed or renewed any fire, marine, accident, health, liability, plate glass, steam boiler, burglary, or theft, sprinkler leakage, fly wheel, automobile property damage, credit or workman’s collective insurance, or fidelity and surety bond covering any risk or on property located in the State of South Carolina, except through or by duly authorized agent or agents of such insurance company or association residing and doing business in this State. The full premium shall be paid to' such agents who are entitled to and shall receive the same commission on such business as the company allows them on other business of the same class. The payment of a fee or any other consideration than the full commission is held a violation of law. Agents who may sign or insurance companies who may cause to be signed any policy or indemnity contract as the resident agent of an insurance company and fails to collect the full premium for such insurance and retain the pfoper commission which is due such agent may have their license revoked as the penalty for aiding in an evasion of the law: Provided, however, that agents licensed under the insurance laws of this State may write insurance at the request of other agents or brokers and allow said agents or brokers not exceeding one-half of the commissions which they receive on the business written.” “(4087) § 34. Boreign Insurance and Other Companies Must Obtain License. — Every foreign insurance company of any class — fire, life, marine, surety, security, guarantee, hail *325 storm, live stock, accident, plate glass, and other like insurance companies — foreign land associations, foreign building and loan associations, foreign banking associations, and all other like classes of like business not incorporated under the laws of South Carolina, except national banks and except benevolent institutions organized under the grand' lodge system, shall each, before transacting any business in this State, pay an annual license fee of one hundred dollars to the .Insurance Commissioner on or before the thirty-first day of March in each year, to be deposited by him in the treasury of the State. "The license issued by the Insurance Commissioner shall give to the company obtaining the same power and authority to appoint any number of agents to take such risks or transact any business of insurance in each and every county of the State, and the same shall be so granted as to expire on the 31st of March of each year. But the Insurance Commissioner must be notified of such appointment before such agent takes any risks or transacts any business, giving the postoffice address and residence of such agent.” (Italics ours.) These Sections of the Code, Sections 4068, 4069, 4072, 4090, 4092 and 4087, which are a part of the general statutory laws of the State, must be construed together, and in construing the same the following rule must' be observed: “The rule that a penal statute must be strictly construed does not prevent the Courts from calling to their aid all the other rules of construction and giving each its appropriate scope, and is not violated by giving the words of the statute a reasonable meaning according to the sense in which they were intended, and disregarding captious objections and even the demands of exact grammatical propriety. When the purpose of the law is manifest, strict construction does not militate against any departure from the primary meaning of words within the reasonable scope thereof.” 25 R. C. L., 1085. *326 We also call attention to the following cases which are in point on the question involved: Mills v. Railway, 82 S. C., 242, 64 S. E., 238; Huguelet v. Warfield, 84 S. C., 87, 65 S. E., 985; City of Anderson v. Fant, 96 S. C., 5, 79 S. E., 641; Rookard v. Railway, 89 S. C., 371, 71 S. E., 992; State v. Fidelity & Deposit Company, 114 S. C., 511, 104 S. E., 182. In our opinion, giving to the sections under which the suit was brought the meaning intended by our lawmaking body, an agent who may represent an insurance company must be not only a resident agent but must also be “regularly commissioned,” and a person cannot be “regularly commissioned” by the company unless approved, that is, licensed, by the State’s proper officer — the Insurance Commissioner. It is therefore the judgment of this Court that the exceptions be and are hereby sustained, the order of nonsuit reversed, and the case remanded for a new trial. Mr. Chiee Justice Brease and Mr. Justice Stabrer concur. Messrs. Justices Cothran and Bonham dissent.