Court Opinion

ID: 5398521
Source: CourtListenerOpinion
Date Created: 2022-01-08 10:28:35.581774+00
Date Added: 2024-06-11T08:30:24.515110
License: Public Domain

Dore, J. P.
(dissenting). The salient issues on this appeal are: (1) whether the determination of the Superintendent of Insurance is subject to review by the court; and, assuming it is, (2) whether the superintendent’s action is contrary to law, arbitrary and unsupported by substantial evidence. In the interest of reasonable brevity, we will not in this dissenting opinion, unnecessarily repeat facts set forth in the majority opinion.
At the very outset it should be emphasized that in this case there is no proof, and no claim even, that this insurance company, its officers or directors, are guilty of “ the flagrant abuses ” reported by the Armstrong Committee in 1905. The officers of Guardian are not charged with any fraud or any other acts of malfeasance in the acquisition and holding of the real estate in question. Nor are they charged with declaring false values or the use of dummy titleholders to cover purchase of property not requisite for the company’s business use. Such were the acts the Armstrong Committee found and denounced. On the contrary, here the good faith, the complete honesty and integrity of the insurance company, its officers, directors and employees are not questioned and on the facts disclosed could not in reason be questioned. In fact the frequent reference the Attorney-General makes to the findings of the Armstrong Committee, shows what unusual contentions the position he has taken forces him to make.
*118The criticisms leveled by the superintendent and his aides at the action of the directors and officers of this company are based on facts that indicate the directors’ conscientious care, foresight and good judgment. Certainly, as the record shows, it is perfectly sensible to move, a little at a time, so that the directors can be best informed and utilize the real estate at first in part for their own business and the protection of vital records.
The Attorney-General has taken what seems to us the untenable position that our Insurance Law proscribes review by the courts where it does not specifically grant review. (Italics mine throughout.) The very opposite is true; the power of review is an essential part of the tripartite division of power that is the peculiar genius of our system of government; viz., such division of power that nowhere the possibility even of the growth of arbitrary power will be tolerated or continued. The Insurance Law (§ 34) does not expressly bar judicial review; and in a state of facts such as we have before us, we find no “ implication ” that when the right to review is not expressly granted, it is statutorily barred. That on the revision of the Insurance Law, an effort to provide expressly for judicial review of “ all ” acts of the superintendent, did not result in such comprehensive statutory compulsion, does not mean that the act of the superintendent before us is not reviewable. We must ever keep in mind the nature and scope of the action here sought to be reviewed. To sustain the right here to review, it is not necessary to contend that all ministerial acts of the superintendent are reviewable. Many trivial ministerial acts depending on solely discretionary matters may not be subject to review. But the action here in question relates not to a trivial ministerial matter, but goes to the heart of the existence and continuity of the business of private insurers in this State; viz., the acquisition of real estate requisite for the transaction of their business.
While under the statutory mandate of section 81 (subd. 7) the “ approval of the Superintendent ” is necessary for such acquisition, that approval in the very nature of the importance and scope of the matters to be approved is ex necessitate a quasi-judicial function. That precisely is how the superintendent treated it in granting a trial before his determination, although he claims the trial was a favor on his part and not necessary. But he did give a plenary hearing at which testimony was adduced on both sides, direct and cross-examination had, exhibits offered and received in evidence. In the face of of the enormous amount of real estate necessarily involved in *119a State that probably has the greatest accumulation of insurance business in the Union, the purchase of real estate for the convenient transaction of the business of private insurers is a matter of major importance. It is unbelievable that the Legislature ever intended to grant to the unreviewable judgment of one man a power of such extent and magnitude.
Section 81 generally relates to “ reserve investments ”. Subdivision 7 thereof relates to real estate and, so far as here relevant, permits acquisition thereof only if acquired or used for the following purposes: (subd. 7, par. [b]) “ Such as shall be requisite for its [the company’s] convenient accommodation in the transaction of its business.” Under subdivision 7 of section 81 “ No real property shall be acquired by any domestic insurer pursuant to paragraphs * * * (b) * * * of this subsection seven except with the approval of the superintendent.” Accordingly, the sole narrow issue before the superintendent was whether the property in question was requisite for the convenient accommodation of the company in the transaction of its business.
When the Legislature orders administrative supervision pursuant to a statute containing an express standard, the administrator must exercise his discretion in conformity with that statutory standard. Therefore, when the superintendent refused the approval in question on the ground that it was not wise or " in the best interests of the policy holders ’ ’, he was applying a test or criterion that by the mandate of the Legislature was not the basis of the test. The superintendent did not follow the standard; he substituted his sole individual and subjective judgment in place of the combined judgment, business experience and legal responsibility of petitioner’s officers and directors.
The insurance business is, of course, affected by public interest and therefore requires regulation. But reasonable regulation in the public interest is one thing. Management and complete right to control business policy placed in the hands of a single administrator is quite another; and, if permitted, would tend to take the private property in question and make the insurance business pro tanto a matter of State ownership and dominion.
Thus in annulling a decision of the Public Service Commission, our Court of Appeals in People ex rel. Delaware & Hudson Co. v. Stevens (197 N. Y. 1, 10) said: “ We do not think the legislation alluded to was designed to make the commissioners the financial managers of the corporation, or that it empowered *120them to substitute their judgment for that of the board of directors or stockholders of the corporation as to the wisdom of a transaction, but that it was designed to make the commissioners the guardians of the public by enabling them to prevent the issue of stock and bonds for other than the statutory purposes ; these purposes we have already enumerated in quoting the statute ”.
In our opinion we should hold that the superintendent’s duties are supervisory only, to enforce the statutes, to review the acts of management and see that they conform to the statutes; but not to supplant management or attempt to formulate business decisions which properly are the sole responsibility of management.
This is the ruling the Appellate Division of the Third Department made concerning the Superintendent of Insurance (People ex rel. Metropolitan Life Ins. Co. v. Hotchkiss, 136 App. Div. 150) in a similar case. In that case, the same question was presented regarding a statute with the identical words of the statute before us. The sole question there was whether or not a tuberculosis hospital for the insurance company’s employees was, as a real estate investment “ requisite for the company’s convenient accommodation in the transaction of its business.” In a comprehensive opinion by Kellogg, J., the court expressly held that the insurance company “ under the statute ” had the power to acquire and hold the real estate in question as a tuberculosis hospital for its employees “ for the reason that the premises are so used for the convenient accommodation of the company in the transaction of its business ’ ’; and, accordingly, “ annulled ” the determination of the Superintendent of Insurance.
Concededly the real estate in question with the other real estate held by Guardian for the same purpose, does not exceed the 10% limitation in section 87 of the Insurance Law; in fact even with the property in question included, the real estate so held by Guardian is less than 1% of its assets. Guardian intends to use the real estate in part for the requisite transaction of its own business. The superintendent adduced no factual evidence to disprove the evidence Guardian had presented in that regard. He merely presented the opinions of three “ experts ” that the purchase was, in their judgment, unwise. The superintendent should refuse approval only when the company’s action is clearly unauthorized, when the property is unrelated to the company’s business or there are no reasonable *121business reasons supporting the conclusion that it is requisite, or there is fraud, other malfeasance or unjust enrichment on the directors’ part.
Since it is integral to the superintendent’s position, that even if he deviated from the law, the courts would have no review, his position is untenable. Even if the Legislature itself attempted to give him the power he now claims, namely the sole, absolute administrative power in his own unreviewable wisdom to control all purchases of all the real estate of all the insurance companies of the State of New York for the convenient transaction of their business — the act would be void as an unconstitutional delegation of power. No administrative officer should have unlimited judgment power without definite standards (Schechter Corp. v. United States, 295 U. S. 495, 530; Packer Collegiate Inst. v. University of State of N. Y., 298 N. Y. 184).
In the absence of explicit statutory proscription of review, the courts should always review at least when an action of this importance is in question. The accepted rule was expressed by Judge Lewis, now Chief Judge of the Court of Appeals, in a unanimous opinion reversing this court (Matter of Schwab v. McElligott, 257 App. Div. 808, revd. 282 N. Y. 182, 186) when the court said: “ The field is limited within which the discretion of an administrative officer or board may be exercised unhampered by judicial review. (People ex rel. Schau v. McWilliams, 185 N. Y. 92, 100.) We think that limit is surpassed by the present record. In the absence of a clear expression by the Legislature to the contrary, the courts may review the exercise of a discretionary power vested in an administrative officer or body to determine whether the case discloses circumstances which ‘ leave no possible scope for the reasonable exercise of discretion in such manner. ’ (Matter of Durr v. Paragon Trading Corp., 270 N. Y. 464, 469; People ex rel. Lodes v. Department of Health, 189 N. Y. 187, 194; Matter of Larkin Co. v. Schwab, 242 N. Y. 330, 334, 335; Matter of Leone v. Brewer, 259 N. Y. 386, 390; Matter of Picone v. Comr. of Licenses, 241 N. Y. 157, 160-162; Matter of Small v. Moss, 277 N. Y. 501, 513; People ex rel. Sweeney v. Rice, 279 N. Y. 70, 73.) ”
Even where the Legislature provides in the clearest possible language exclusion of judicial review as in section 890 of the Education Law, the Court of Appeals has reviewed just such action. In the Matter of Chapin v. Board of Educ. (291 N. Y. 241, 244-245) the Court of Appeals ruled: “ Section 890 of the Education Law makes ‘ final and conclusive, and not subject to *122question or review in any place or court whatever ’, a decision of the Commissioner of Education on an ‘ appeal ’ to him in a controversy such as this. Similar provisions have been in the statutes since 1822 (see chapter 256 of the laws of that year). Since the Commissioner’s determination of this controversy is not shown to have been 1 purely arbitrary ’, it was and is final and binding on petitioner and his colleagues ”. In the Matter of Adler v. Wilson (282 App. Div. 418) the Appellate Division, Third Department, after discussing the merits of a question that had been before the Commissioner of Education under section 310, said (p. 426): “ We conclude that the decisions of the commissioner were not contrary to law and were neither arbitrary nor capricious. The order appealed from should be affirmed ”.
This company has over a billion dollars of insurance contracts outstanding. For the protection of policyholders and their families and the financial integrity of the company itself, it was the plain duty of management to give serious thought and to take proper action for the protection of vital records, if the company was successfully to survive. Payments to policyholders are based on accounting records and documents, and without them, the company is without protection against false or fictitious or exaggerated claims. Management would be derelict in its duty if it did not take reasonable precautions in the light of the danger of disaster in the atomic target in which the records are now filed. This was a necessary, reasonable and proper exercise of prudence and foresight. The action of the directors and officers was eminently sound.
The inaccuracy of the claim that Guardian provided “ a somewhat indefinite program ” is revealed when one examines petitioner’s Exhibit “ F ” and other following exhibits printed in this record which presented to the superintendent full and detailed plans of the company’s objectives.
References to the Alcoholic Beverage Control Law are obviously neither appropriate nor controlling here. That law provides at the very outset thereof (§ 2, Policy of State and purpose of chapter) that the Liquor Authority’s power to determine public convenience or advantage is “ subject only to the right of judicial review hereinafter provided for ’ ’ (italics mine throughout). No such restrictive language is found in our Insurance Law.
It is true, the company at the outset acquired the White Plains property not as requisite for the convenient accommodation of its business, but as an investment for rental; and as such *123it should be noted no statutory approval of the superintendent is required. In the course of the hearings, Mr. Smith, associate counsel for the Insurance Department, expressly stated that the attorney for the insurance company and he had agreed that Guardian’s application for approval should be deemed amended so that the company moved “ solely at this time for permission for acquisition of property under 81 (7) b The company’s attorney ‘ ‘ So conceded ’ ’. That should completely and finally dispose of any question of uncertainty.
We should follow the Hotchkiss case (supra) which vindicated the court’s power to review the “ approval ” of the superintendent in precisely such a state of facts construing precisely the same statutory language. The real property is requisite for the convenient accommodation of the transaction of this insurance company’s business. There is no substantial evidence in the record to the contrary meeting all the essential facts established. In the light of all the facts adduced, including the numerous examples of many other successful corporations that have moved to suburban cities, and the Government announced need to decentralize and provide as soon as possible a safe place for essential company records outside New York City, the action of Guardian’s directors and oEcers was legal and essentially sound and sensible.
The decision of the Special Term should be reversed, the determination of the Superintendent of Insurance annulled on the ground that it is contrary to the statutory criteria of section 81 (subd. 7, par. [b]). In view of the long delay that has already ensued and the serious and dangerous consequences to petitioner if approval is not expeditiously given, we think it unnecessary to remit the issues to the superintendent, but the superintendent should be directed to approve the acquisition of the real estate in question as requisite for the convenient accommodation of the Guardian Life Insurance Company of America in the transaction of its business; and we dissent accordingly.
Breitel, J., concurs with Botein, J.; Callahan, J., concurs in aErmance in opinion; Dore, J. P., dissents and votes to reverse, in opinion in which Cohn, J., concurs.
Order aErmed, with $20 costs and disbursements to the respondent.