Source: https://law.justia.com/cases/california/supreme-court/2d/48/71.html
Timestamp: 2019-10-19 15:24:03
Document Index: 271573181

Matched Legal Cases: ['§ 579', '§ 11738', '§ 11730', '§ 1875', '§ 752', '§ 11742', '§ 1596']

CONTRACTOR'S ETC. ASSN. v. CAL. COMPENSATION INS. CO. :: :: Supreme Court of California Decisions :: California Case Law :: California Law :: US Law :: Justia
Justia › US Law › Case Law › California Case Law › Cal. 2d › Volume 48 › CONTRACTOR'S ETC. ASSN. v. CAL. COMPENSATION INS. CO.
Edmund G. Brown, Attorney General, and Harold B. Haas, Deputy Attorney General, as Amici Curiae on behalf of Respondent. [48 Cal. 2d 73]
The above facts are alleged in three counts. The first is an action upon the collateral agreement which the plaintiff [48 Cal. 2d 74] contends is a part of the contract of insurance entered into on October 11, 1950. The second is on a common count for money had and received; the third is for punitive damages.
The receipt of a rebate is made a misdemeanor by Insurance Code, section 752. The code does not, however proscribe all rebates. [1] Insurance Code, section 763, permits rebates under certain conditions. Subsection (a) of that section provides for "The return by an insurer issuing policies on a participating plan, of any portion of the premium as a dividend after the expiration of the term covered by such policy." While the return of a part of the premium would otherwise constitute an unlawful rebate, the return of part of the consideration is permitted under section 763. This provision is, however, limited to participating policies the premiums on which have been defined as follows: "... [P]articipating premiums are those in which the profits therefrom are shared by those who have paid the premiums." (Couch, Cycl. of Ins., § 579.) In State Comp. Ins. Fund v. McConnell, 46 Cal. 2d 330, 341 [294 P.2d 440], this court said (in reference to Ins. Code, § 11738), " 'Participating' refers to the right to share in earnings and does not refer to the price paid for insurance." Where a dividend agreement is not one to share profits the dividend cannot be said to be "participating" within the meaning of section 763.
[2] The minimum rating law (now Ins. Code, §§ 11730-11742) was enacted in 1915 to eliminate irresponsible premium policies which developed in response to competitive conditions in the insurance field. The purpose of this law was to require a premium rate which would assure adequate reserves to meet claims as they matured. Obviously, the purpose of the law would be frustrated if collateral agreements could effect a [48 Cal. 2d 75] reduction of the premium. For this reason agreements affecting the premium were brought within the scope of statutory and administrative regulation.
[3] In ruling on the demurrer to the introduction of evidence, the trial court had before it the Insurance Code and administrative rules of the Insurance Commission. Although not pleaded, the trial court could take judicial notice of "Public and private official acts of the legislative, executive and judicial departments of this state. ..." (Code Civ. Proc. § 1875.) [4] That matters judicially noticed may be considered in construing the pleadings is well settled. (Chavez v. Times Mirror, 185 Cal. 20, 23 [195 P. 666]; French v. Senate of State of California, 146 Cal. 604, 607 [80 P. 1031, 2 Ann.Cas. 756, 69 L.R.A. 556]; Mendez v. Pacific Gas & Elec. Co., 115 Cal. App. 2d 192, 195 [251 P.2d 773]; Clark v. City of Pasadena, 102 Cal. App. 2d 198, 200 [227 P.2d 306]; Livermore v. Beal, 18 Cal. App. 2d 535, 539 [64 P.2d 987]; Fey v. Rossi Imp. Co., 23 Cal. App. 766, 770 [139 P. 908].) [48 Cal. 2d 76]
[6] The plaintiff contends that, assuming the agreement to be illegal, it is not barred from recovery because it is not in pari delicto with the defendant. McAllister v. Drapeau, 14 Cal. 2d 102 [92 P.2d 911, 125 A.L.R. 800], is relied upon. The plaintiff in that case was of a class for whose sole benefit the statute was enacted. Recovery was predicated on the repudiation of an illegal transaction. Here the plaintiff seeks to recover under an illegal agreement. (See Severance v. Knight-Counihan Co., 29 Cal. 2d 561, 569 [177 P.2d 4, 172 A.L.R. 1107].)
Acceptance or receipt of an unlawful rebate is a misdemeanor. (Ins. Code, § 752.) Violation of the minimum rating law is also a misdemeanor. (Ins. Code, § 11742.) This court said in Severance v. Knight-Counihan Co., 29 Cal. 2d 561 (supra), at page 568: "It is settled that a contract must have a lawful object (Civ. Code, §§ 1596, 1598, 1599) and that a contract for an object prohibited by a penal law is void. ... 'The general rule controlling in cases of this character is that where a statute prohibits or attaches a penalty to the doing of an act, the act is void, and this, notwithstanding that the statute does not expressly pronounce it so, and it is immaterial whether the thing forbidden is malum in se or merely malum prohibitum. ... The imposition by statute of a penalty implies a prohibition of the act to which the penalty is attached, and a contract founded upon such act is void.' "
[7] The third count alleges that the board of directors of the defendant insurance company passed a resolution, unknown to the plaintiff, providing that no dividends would be paid without further resolution by the board; that the defendant concealed the existence of the resolution from the [48 Cal. 2d 77] plaintiff because the defendant knew that the plaintiff would not enter into a contract with the defendant if the resolution were known to it. This, the plaintiff alleges, was fraudulent. The third count further alleges that the defendant withheld dividends from the plaintiff because the plaintiff ceased doing business with the defendant; that the defendant was "... actuated by malice against the plaintiff and that as punishment for said malicious and oppressive conduct, plaintiff requests punitive damages in the sum of $50,000." The third count though phrased in the language of fraud is clearly based upon breach of contract. The injury thus complained of is the refusal of the defendant to perform the contract. No compensatory damages are sought because of the alleged fraud. [8] Punitive damages are not recoverable where compensatory damages are not. (Clark v. McClurg, 215 Cal. 279 [4 P.2d 149, 9 P.2d 505, 81 A.L.R. 908].) [9] It is settled that punitive damages may not be awarded "... in an action based on breach of contract even though the defendant's breach was wilful or fraudulent." (Crogan v. Metz, 47 Cal. 2d 398, 405 [303 P.2d 1029].)