# FILED

September 10, 1998 Cecil Crowson, Jr. Appellate C ourt Clerk IN THE COURT OF CRIMI NAL APPEALS OF TENNESSEE

AT KNOXVILLE APRIL 1997 SESSION

) C.C.A. No. 03C01-9610-CR-00360 ) ) LOUDON COU NTY ) IN RE: ) HON. E. EUGENE EBLEN, JUDGE INTERNATIONA L FIDELITY ) INSURANCE COMPANY ) ) )

FOR THE APPELLANT : FOR THE APPELLEE : JOHN K. KING JOHN KNOX WALKUP ALAN M. PARKER Attorney General and Repor ter P. O. BOX 2425 Knoxville, TN 38901 MICHAEL J. F AHEY, II Assistant Attorney Gener al 450 James Robertson Parkwa y Nashville, TN 37243-0493 CHARL ES E. HA

WK District Attorney General FRANK A

. HARVEY Assistant District A

ttorney General P. O. BOX 703 Kingston, TN 37763-0703

OPINION FI LED:

REVERSED AND REMANDED

CHRIS CRAF

T, SPECIAL JUDGE

O P I N I O N2 International Fidelity Insurance C ompany appeals as of right the entry of an order summarily denying it permission to underw rite bail bonds in Loudon County due to its failure to deposit funds w ith the Loudon County

Court Clerk

pursuant to a local rule of court. Appellant pre sents two i ssues for our review : (1) whether the State Commissioner

of the Department of Commerce and Insurance is mandated by statute to be the regulating authority of insurance companies doing business in Tennessee, thus preempting the authority of the local courts, and (2) w hether a local court has the authority to require additional local cash deposi ts over and above the $100,00 0 required by statute to b e made to the state, even though the insurance compan y is found to be solvent and o therwise qualified by the State Commissioner of the Departmentof Commerce and Insurance to do business in the courts of this state. For the reasons stated in this opinion, we s et aside the order of the trial court denying the petition and remand this cause for a hearing on the me rits. THE HEARING

ON THE PETITION Appellant insurance company filed a petition in Loudon County to qualify as a bail bondsman through its excl usive authorized agency, Sanford and Sons Bail Bonds, Inc. On the date of the hearing on t he petition, c ounsel for the insurance company indicated by way of an opening statement that the company had filed a proper petition, with affidavits in support, and that the state had filed no opposition to its req uest. Therefore, since the company was quali fied by the Commissioner of Commerc e and Insurance to do business u nderwriting b ai l bondsmen in the State of Tennessee, appellantasked the Court to grant the pe tition. In addition to its affidavits, the company

had witnesses present and ready totestify if either the state or the trial court had any question as to sol vency. The state responded that it did not que sti on the solvencyof the company, but did have doubt s about the fitness of Mr. Hite J. Sanford, Jr., owner of Sanford and Sons B ail Bon ds, Inc. , and pro duced a c

ertified copy o

f a court order from Blount County C ircuit Cou rt indicating that Mr. Sanford had made illegal payoffs to the sheriff of Blount County in order to make bonds. The trial judge then asked appellant, sua sponte ,3 THE COURT: IsMr. Sanford in a position to post the $50,000 cash for the firs t county a nd 25 cas h with the c lerk for e ach adjo ining coun ty? MR. PARKER: Your

Honor, we’d like to make clear that the bonds that are underwritten through Sanford -- THE COURT: That is not my qu estion. Answer my q uestion and then you can explain anything you want to answer. These are not under oa th, but we’ll proce ed that wa y. MR. PARKER: Well, Your Honor, we don’t think that such a requirement should be placed upon International Fi delit y who actually issues the bonds. The bonds in this case are -- THE COURT: You do realize that is part of the rules of this distric t, and all the ot her bond ing compa nies have posted t heir mon ey? MR. PARKER: Your Honor, I take it that you say that is the rule and -- THE COURT: Those rules are on record in all the clerks’ offices. MR. PARKER: Your

Honor, our position is that that rule shouldn’t apply to a corporate surety that is regulated by th e Department of Commerce and Insurance that has met all the requirements of the State of Tennessee t hat has made deposits. THE COURT: Still have n’t answered my ques tion. MR. KING: And the question was, Your Honor? THE COU RT: Is M r. Sanfo rd, Sanf ord & Sons Bonding Co mpany, prepared to post $50,000 for the first county and 25 for each adj oining county he wishes to bond in? MR. KING: No, You r Honor. It’s our position that he should not be required to do so. THE COURT: The Court will hav e [the Blount County

order regarding Mr. Sandford] marked as an exhibit, and we’ll take the case under advisement, and we’ll note -- gi

ve you notice sometime dur ing the January [term]. MR. KING: Does Your

Honor want to hear any proof with regard to the issue of solvency of the appl icant, the petitioner in thi s case? THE COURT: I think that the i nsurance company is solv ent. MR. KING: So can we have then, Your Honor, the essenc e of finding by the Court that International Fidelity Insurance C

ompany meets all the solvency requirements and do I understand then that there is -- THE COURT: No. You can’t have such a f inding. To make a record, appellant then gave an ora l summary of his witnesses’ testimo ny, by way of an offer of proof as t o solve ncy, and had several doc uments marked as exhibits for the recor d. After taking the matter under advisem e nt for f ive months, the trial judge entered an order summarily denying the petition, w hich stated that The petition for qualification for Bail Bondsman is denied because ofthe failure to comply with the l ocal rules of depositing c ash with the Clerk of the Court. All other matters, including the fitness ofthe agent, are reserv ed for any future hearin g. The insurance company appeals from the dismissal of its petition.

AUTHORITY

OF LOCAL COURTS TO REGULA TE BONDING COMPA NIES Appellantfirst argues that the S tate Commissioner of the Department of4

Commerce and Insurance is mandated by Tenn. Code Ann. §56-15 -1 01, et seq

. (1994), to be the regulating authority of insurance companies doin g business as bonding companies in Tennessee, thus preempting the authorit y of the local courts to also impose their own regulations. However, this C ourt previously dec

ided this issue against appellant in In Re Hitt , 910 S.W.2d 900 (Tenn. Crim. App. 1995). In that case we held that it is the trial court's function to regulate the professi onal bondsmen that execute bonds in its court, and it may impose reasonable l imitations on the total liability of such bondsmen's undertakings in that cour t. [T.C.A. §§ 40-11-302--306]. Further, a trial court h as the i nherent power to adm inis ter

its affairs, including the right to impose reasonable regulations

regarding the making

of bonds. Taylor v. Waddey , 206 Tenn. 497, 334 S.W.2d 733 (1960). Hull v. State , 543 S.W.2d 611, 612 (Te nn. Crim. App. 1976). In other words, the trial court is given wide discretion in its r egulation of bail bondsmen and its actions will not be o verturned absent a showi ng t hat they we re arbitra ry, capricious

or illegal. Taylor v. Waddey , 206 Tenn. 497, 504, 334 S.W.2d 733, 736 (1960). Moreover as Taylor notes, the fact that

the legislature has

enacted statutes dealing with bail bondsmen and their regulation d oes no t in any way interfere with the inherent pow ers of regulation possessed by the court to act in addition to the statutes. Id

. In Re Hitt , supra , at 903-904. Therefore, statutory authority given the executive branch of government

to regulate insurance c ompanies does not preempt the inherent power of the judicial branch to supervise the orderly administration of the courts, whi ch includes the imposition of reasonable regulations regarding the making of bail bonds. This issue is without merit.

AUTHORITY TO REQUIRE ADDITIONA L DEPOSITS Appellantnext sugge sts that since Tenn. Code Ann. §56- 15-105 (1994) requires t hat a $100,000 deposit must be made with the State Commissioner of Commerce and Insurance before any suret y company is authoriz

ed to execute bonds in this state, attempts by a local court to requ ire that additional funds must be deposited locally by the surety before it can be allowed to execute bonds in that judicial district is in direct conflict w ith state law. This Co urt finds no suc h conflict. Ou r SupremeCourt, i n In Re: Indem. Ins. Co. of North America , 594 S.W.2d 705 (Tenn. 1980), held that It is true, as pointed out by the appellant, that insura nce compan ies which qualify under T.C.A. §§ 56-1401 to 1415 [now §§56-15-101 to 115] are required to post assets with the D epa rtment o f I nsurance in this state, or with similar5 officials in other states, whic h are subject to being rea ched by local courts to satisfy bail bond obligations. Ordinarily an insur ance company which compli es with these statutes should not be required to file additional asset s with l ocal courts in theabsence of a finding by local judges of specific reasons therefor

. We agree with counsel for appellant that the st atutory scheme provided by the insurance laws ordinarily should afford sufficient ready, li quid assets to satisfy the obligations of an insuranc e carrier writi ng bail bonds.... Nevertheless, ... ther e can b e no question, in our opini on, of the legal authority of local courts to require the posting of additional ass ets to secure bail bond obligations of any professional bondsman, insurance carrier or otherwise

. Id

. at 708 (emphasis supplied). Therefore , Tenn. Code Ann. §56-15-105 (1994) does not proh ibit a trial court of this stat e from requiring the posti ng of additional assets locally, provided th e court sets out s pecific reason s for its ruling. In the denial of the instant petition, the only reason given by th e trial judge in his order was the insurance company ’s “failure to comply with the local rules of depositing cash with the Clerk of the C ourt.” He gave no s pecific reason why the additio nal deposit was needed, other than that a local rule required it. No copy of that local rule was included in the rec ord on appeal. It is well settled that the trial courts of this state have the authority to mak e and implement reasonable local rules of practice and procedure in their respective courts,

as long as these local rul es do notconflict with a substantive rule of state law. Richie

v. Liberty Cash Grocer s, Inc . 63 T enn. App. 311, 471 S.W.2d 559, 560 (Tenn. App. 1971); Brown v. Daly , 884 S.W.2d 121, 123 (Tenn. App. 1994); Pettus v. Hurst , 882 S.W.2d 783, 786 (Tenn. App. 1993). "No rul e of court is ever effective to abrogate or modify a s ubstantiv e rule of law," howev er. Brown , 884 S.W.2d at 123. The substan tive rule o f l aw to be followed in this case is that ordinarily, “an insurance company

which complies wi

th [Tenn. Code Ann. §§56-15-101 to 115] shoul d not be required to file additional assets with local courts in the absenc e of a finding by local judges of specific reasons therefor.” In Re: Indem. Ins. Co. of North America , supra , at 708. Therefore, a local rule of law that would require the deposit of additional funds before a petition to qualify c ould be heard would be null and void ab initio to the extent that it conflicts

with the substantive right of the insurance company to hav e a hearing

on the merits, and the right to be required to p ut up additional funds only upon a finding by the trial j udge of specific reasons therefor. On appeal, “the trial court is g iven wide d iscretion in its regulation of bail6

bondsmen and its a ctions will not be overturned absent a showing that they were arbitrary , capricious or illegal.” Taylor v. Waddey , 206 Tenn. 497, 504, 334 S.W .2 d 733, 736 (1960), cited in In Re Hitt , supra , at 904. “Arbitrary and capr icious” ha s been defined in part as an "unreasoning action, w ithout consideration and in disregard of the facts or circumstances of the case.” Wright v. Bd. of Dispensing Optic ians , 759 S.W.2d 929, 932 (Tenn. Ct. App. 1988); see also Black’s Law Dictionary 105 (6th ed. 1990). From the sparse record before us it appears the trial judge made the following of the local rule a prerequisite to the hearing of the petition on its merits, and so did not consi der the solvency of the company or any of the particular facts in th e case. H e then summarily denied the petit ion, finding only that the deposit ofadditional funds still had not been made afte r a five m onth wait. Since the dis missal of the petition occurred without allowing the insurance company the r ight of a hearing anda finding of specific reasons, if any, as to why it might be re quired to make a local deposit of cash with the Loudon County Court Clerk, this Court finds the denial of the petition to be “without considerati on and in disregard of the facts or circumstances of the case,” and therefore arbitrary and capricious. For this reason, the order of the trial court denying appellant’s petition to qualify

as a bail bondsman is hereby set aside, and this cause is remanded to the trial court fora hearing on the merits o f t he petition. If the trial cour t, after a hearing, qualifies appellantto underwrite bail bond s in Loudon County, it may require ad ditional cash deposits, deedsof trust, or any other liquid assets it deems proper to be held by the Loudon County Court Clerk, upon a finding of specific reasons ther efor. See , e.g. , State v. AAA

Aaron’s Action Agency , 1997 Tenn. Crim. App. LEXIS 956, C.C.A. NO. 01C01-9608-CR-00348, David son County (Ten n. Crim . App., fi led S eptember 30, 1997).

CHRIS CRAFT, SPECIAL JU DGE7

CONCUR:

JERRY L. SMITH, JUD GE

JOE RILEY, JUDGE