Miller ex rel. State v. Fidelity Union Fire Ins.

1. Equity. On hearing of chancery cause on hill and answer before expiration of time for taking testimony, denials, averments, and admissions in answer must he taken as true. Where a cause pending in the chancery court is set down for hearing by the complainaat upon bill and answer before the time has elapsed for the taking of testimony, the court must consider the denials, the averments, and the admissions made in the answer as true. Section 603, Code 1906 (section 263, Hemingway’s Code). 2. Equity. Monopolies. In penal suit for violation of Anti-Trust Law, unlawful agreement must he averred. In suits for the violation of chapter 119, Laws 1908 (Hemingway’s Code, section 3281, pars, [h] and [i], and section 3282), one of the necessary averments of the bill is the unlawful agreement mentioned in these sections. When the answer denies this agreement and the cause is set down for hearing upon bill and answer, as above stated, the denial of the answer is to be taken as true, and there is no violation of either of these sections. 3. Monopolis. TJnlaioful agreement must he averred in prosecution of insurance companies for violationg Anti-Trust Law. In a suit for a violation of these sections of the Anti-Trust Law, one of the material averments in a bill, which must be either admitted by the answer or proved, is the fact of an unlawful agreement, either directly among the insurance companies themselves, or an agreement to absolutely delegate the power to fix the insurance rates to a rating bureau and to be bound by the rate established by the bureau. 4. Monopolts. One insurance company cannot violate Anti-Trust Lavo hy adopting insiirance rate fixed hy other companies. One insurance company, in the absence of an agreement, coulcl not violate this law by independently adopting as its rate of insurance the advisory rate of this bureau. 5. Monopolies. Denial of agreement to fix rates held sufficient in prosecution for violating Anti-Trust Law. The fact that several insurance companies have adopted the rate promulgated by the Mississippi, Inspection & Advisory Rating Bureau, and their answer specifically denies any agreement of any kind among them to so adopt, and further denies any agreement among them to delegate the rate-fixing power to this bureau, this is a denial of one of the necessary elements to be proven to constitute a violation of these laws, namely, a denial of any agreement as to the fixing of the rate or the delegation of this power to the bureau.

Appeal from chancery court of Pike county. I-Ion. R. W. Cutrer, Chancellor. Suit by Hugh B. Miller, District Attorney, for the Use of the State, against the Fidelity Union Fire Insurance Company and others. Bill dismissed, and plaintiff appeals. The section of the statute defining Trusts and Combines: “A trust and combine is a combination, contract, understanding or agreement, expressed or implied.” Thus by the terms of the statute itself the understanding or agreement may be implied to fix and maintain “the price or premium to he paid for insuring property against loss or damages by fire, lightning or tornado.” Independent of the statute conspiracies may, by the common law, and usually are implied and are not usually susceptible of proof by direct or positive evidence, but may be always implied from circumstances. There can be no doubt that the combine and agreement involved here which is a criminal conspiracy may be implied from sufficient circumstantial evidence to establish it. I state in advance that I have no doubt about the authority and legality of the Advisory and Eating Bureau to make the necessary surveys and classifications and advisory rates, still this question is not involved in the solution of the questions here before the court. The question still remains was it lawful to agree uniformly to use this information solely as to the basis of contracts of insurance and to agree to be governed by these advisory rates, in fixing premiums to be charged and to thus destroy all competition between insurance companies in this state. In other words, I think it will be conceded that the prime object and purpose of our anti-trust statute was to prevent combinations or agreements which would destroy competition in the particular matter of fixing rates for fire insurance. In Eastern States Lumber Dealers Association v. The United States, 234 U. S. 600, the supreme court of the United States said that it was an unlawful combination and conspiracy for retail lumber dealers to circulate among themselves a list of all wholesalers who were selling to the retail trade. The court held that upon a mere proof of the circulation of this black list, so called, among the retailers made an implied agreement, without any express, agreement, was made out, in restraint of trade and violative of the Sherman Anti-Trust law. See Grenada lumber Company v. State of Mississippi, 217 U. S. 733. Again in Carroll v. The úreemoich Insurance Company, 199 U. S. 401, the supreme court of the United States held that the act of the state of Iowa of 1897 prohibiting combinations of insurance companies as to rates, commissions and methods of transacting business was not unconstitutional or in violation of the Fourteenth Amendment to the Constitution of the United States, which ends/the contention on that subject in this case. So we say here we may concede that it was perfectly lawful for the companies to have employed the advisory bureau to gather all the information as a basis for an insurance contract and to use it, but “an agreement between the companies relating to the rates which may be based on those results,” is quite a different thing, and that this agreement “readily would be inferred if they were found all to charge the same rates.” In this case we have the direct authority for an implied agreement from the mere fact of charging uniform rates. So here we have the case of all these companies using all this information gathered by the advisory bureau and 'on that uniformly using the uniform rates prepared by said bureau, and it seems to me therefore that a blind man would infer that there was an agreement to charge the same rates and to maintain the same; the prevention of which is the object of our anti-trust laws. We have endeavored as speedily as possible to present this question for final determination by this tribunal, well knowing that the public interests demanded a speedy settlement for the questions involved. We base our stand in this case squarely upon what we consider to be 4wo fundamental propositions. The first is that where a cause is set down on bill and answer: That the answer and every allegation therein is taken as true; and second, that this court will only pass on such matters as are necessarily involved in the decision of this cause and will not in any way attempt to prejudice the case of the revenue agent in his anti-trust suit. Standing upon these two fundamental principles, we will attempt to show the court that under the peculiar state of this record that no question of an implied agreement, nor the legality of the methods of the rating bureau can arise, as the defendants in their answer, specifically deny each and every allegation in the complainant’s bill and state .that they had not agreed to fix rates; that they had not subscribed to the rates of the bureau and as far as they knew had never used the same, and that if their agents had used the same it was without their knowledge and authority. While the law of conspiracy admits of a very wide range of evidence and. while circumstantial evidence of course may establish a conspiracy, yet, so far as we have been able to find where it is admitted that no agreement was entered into, and nothing unlawful was done by the defendants, never have the defendants been found guilty. Let us now take up that part of the record that relates to the use of the rates, agreements, etc., paragraph by paragraph, ' as under our view of the law this constitutes the facts in the instant case. In paragraph six we find that the defendants deny that on January 1, 1921, they entered into or became a party to an agreement or combination to regulate and fix the price of the premiums to be paid for insuring property against loss or damage by fire and the defendants state that any such charge is false, untrue and without any foundation whatsoever, in fact or in law. In paragraph seven of the answer defendants deny that on each and every day since January 1, 1921, they became a party to an agreement, combination and conspiracy to fix the price or premium to be paid-for insuring property against loss or damage by fire and they state that such charges are absolutely false and untrue and they deny utterly and unqualifiedly that there was any agreement, combination or conspiracy as alleged in the bill. In paragraph eight, defendants deny that they carried out any unlawful agreement or combination whatsoever, and especially in the manner alleged in the bill that is by allowing the bureau to fix the price to be paid for insuring property against loss by fire, and they deny that they have ever subscribed for the service of the said bureau; deny that they have ever knowingly used the rates of the bureau and deny that they have ever entered any agreement to charge the public as the price to be paid for insuring property against fire, whatever price the bureau should fix. In paragraph nine, they deny that the premiums they charge in their policies were those prescribed and fixed by the bureau and they especially deny the allegations in paragraph nine of the bill charging them with this fact as being false and untrue in every particular. In paragraph ten the defendants deny that they did contract and agree with each other by which other persons than themselves, their proper agents, officer or employees, to-wit, the Mississippi Inspection & Advisory Eating-Bureau did dictate and control and did have the power to dictate and control the management of their business in the matter of fixing rates and they affirmatively state that said charge and allegations is especially false and untrue. In paragraph eleven, .defendants specifically deny that they entered into an agreement to maintain the price to be paid for insuring property after the price to so insure had been fixed by the bureau and then they again deny all such allegations as being false and untrue in every particular. In paragraph thirteen of the answer, they deny that they ever procured the information and rates provided by the bureau on that they were then acting under said bureau’s rules and regulations or that they bound themselves together to be governed' as to the rates to be charged by the bureau’s rates. They then further deny that they were engaged in the Fire Insurance business in Mississippi in such a manner as to destroy competition therein. In paragraph fourteen, on page 61 of the record, they deny that they are relying- upon the text book for rates fixed by the bureau or that they are in any manner violating the anti-trust laws of the state. In paragraph seventeen they stated that they never subscribed to the rates furnished by the bureau or that they agreed among themselves to use the rates. In this paragraph, on page 3 of the ¿record they state, “that it may be true that their agents (the same being the agents of the old line companies that had left the state) did use and adopt as a basis for fixing the rates, the information and advice promulgated by the rating company and while your defendants deny that the use of said rates were authorized by or used under the instruction of your defendants, still your defendants aver that the 'use of the said rates, information and advice furnished by said agent, even if authorized by your defendants or any of them which in fact is not true, as a basis for fixing rates for insuring property in the state of Mississippi was in no sense a violation of the anti-trust law or any other law of the state.” This is the only part of the bill upon which the district attorney could possibly reply upon on this appeal.” The rest of the answer contains nothing more than a homily upon the great blessing and benefits that flow to the insuring public from the operation of the Bureau and we contend that the same is absolutely immaterial and was possibly put into the answer by the defendant out of an abundance of caution. We do not see how a decree could possibly be rendered against these defendants on the simple allegation that it may be true that some of their agents did, at some time, without their knowledge, authority or consent, use some of the information hitherto promulgated by the bureau during the two or three months they operated in Mississippi, after they had specifically denied every allegation of a conspiracy; specifically denied that they had subscribed for or used these rates or that they had combined in any manner whatsoever and stated that every allegation in said bill was false and untrue. We find in Mr. Miller’s bill nowhere any statement that the agents were using uniform rates throughout the state, but in his brief he says that the case should be reversed because “the answer does not deny that their agents were conducting the business of several defendants as charged in the bill.” It appears to us that a complete answer to this statement of fact in Mr. Miller’s brief is found in the specific denials that these companies or any of them ever conspired, combined confederated or agreed, first to use the rates, second, to purchase the rates; third, to maintain the rates; and fourth, to allow the bureau to dictate the rates. It may be that where these defendants who entered the state and placed the conduct of their business in the hands of agents, who had hitherto represented the old line companies and had used the rates of the bureau ever since they had been in the business, that in some instances some of the agents would use in some of their policies the rates as declared by the bureau, But can merely and occasionally the using of these rates where it is specifically denied that there was an agreement to use the rates, become the basis of an implied conspiracy, where the answer is admitted to be true? In the main, we agree with the conclusions of law as stated in Mr. Miller’s briei, but we feel that under the state of this case that this law has no application. However we find one marked inconsistency in his brief, and one admission of law that we will, at the proper time, strenuously combat. That is as follows: On page five o.f his brief he uses the following language: “I state in advance that I have no doubt about the authority and legality of the advisory and rating bureau to make the necessary surveys, classifications and advisory rates.” Yet, we find him undertaking to prove an implied conspiracy from this “so called” legal method of fixing rates. At the proper time we will take issue with this view of the legality of the operation of the bureau, and especially where it can be shown that this operation extended over some years, but as we conceive this case, it is unnecessary to do so here, as these defendants were not subscribers of the bureau and denied that they knowingly used the rates, this admission- has no place in this case. : We also disagree with many, if not all, of the conclusions of law stated in the brief of appellee. However, we do not feel it necessary to go into a long discussion in this brief of these questions. The court of necessity must know that we hold no brief for the conduct of the appellees. We do not- represent them, never have, and in all liklihood never will, and the only interest that we. can possibly have in this matter is, as a friend to the court, to point out what we conceive to be the true issue in the instant case in an endeavor to show to the court that it is not necessary , in this case, which is far indeed from a typical anti-trust insurance case tc pass in any manner upon the legality of the operations of the rating bureau or as to what does or does not constitute an implied agreement to fix rates or in any manner whatsoever prejudice any- of. the questions that might be involved in the revenue agent’s case against the fire insurance companies theretofore operating in the state. It will be noted in the case at bar that counsel for appellant concede in their brief that ,the methods of doing business employed by the rating bureau are legal and correct, and counsel for appellee, though expressly denying that they used the rates of the rating bureau, undertake to defend the methods of business adopted by the rating bureau. The pleadings in this case show that the appellees were not subscribers to the rating bureau, and had not knowingly used the rating bureau’s rates, and that if such rates had been used it was without their knowledge or consent. Clearly then, the questions as to the buying and selling of rates, the general use of them by those who do buy and sell them, and the necessity for a uniform or standard rate and similar questions are not involved in this controversy. The issues last mentioned will in all liklihood be presented to this court in the suits of the revenue agent above mentioned, where upon proper pleadings and evidence the state revenue agent has taken issue with the views expressed by the distinguished district attorney. We, therefore, urge that in passing upon this case that the court expressly state the facts of this particular case and confine its decision as nearly as possible to the record here presented without passing favorably or unfavorably upon issues necessarily and properly involved in our own suit, but not involved in the present suit. • 1. Under the pleadings in this case it is utterly impossible for any combination or conspiracy in violation-of the said anti-trust law to be found to exist by the court. It is admitted in the bill of complaint that there is no evidence to be had of any express agreement. It is admitted that if there is any such agreement, it only arises from an implication to be drawn from the continued use of the same rates by all of the defendants to-wit: The rates fixed by the Mississippi Advisory Rating & Inspection Company. How utterly absurd is any such contention with great, deference to counsel for complainant, will be seen by the court when it observes that the answer expressly and in great detail denies any such agreement to exist and emphatically denies that the officials of the defendant companies had ever subscribed for or used or had in their posession any of the rates of the said Advisory Rating & Inspection Company, and denied that they had ever directed their agents to use such rates and that if use had ever been made of them by their agents that it was not under their instructions. Counsel for appellant cites authorities in his brief to show that direct evidence of a conspiracy is difficult to get, and that such conspiracies are not susceptible of proof by direct or positive evidence, but that it may be implied from circumstances. He cites the case of Carroll v.. Greenwich Ins. Go., 199 U. S. 401, and seems to build his whole case upon this decision of the supreme court of the United States to the effect that an agreement between the companies readily might be inferred if they were found all to charge the same rate. But there is absolutely no evidence to that effect or allegation by the defendants that the same rates were used by all the defendants. We challenge counsel for appellant to cite one case in all the annals of the anti-trust litigation of the-United States to sustain any such contention. This advisory rating company was not organized by the insurance companies formerly doing business in this state, nor according to the pleadings by the defendant-appellees in this cause, was it a child of their creation nor did they control it in any way. The case of the Grenada Lumber Go. v. The State of Mississippi, 217 U. S. 433, therefore is not in point, nor is the case of Fire Insurance Compames v. State of Mississippi (Popularly known as the Southeastern Tariff Association Case), 75 Miss. 24. Likewise the case of the Eastern States Limber Dealers v. The United States, 234 U. S. 600, where the retail lumber dealers issued a black list of the wholesalers who sold direct to the retail trade, has no bearing on the case at bar. 2. Even if the court could be brought to believe that the pleadings in this case justified the inference by this court that these defendant companies were using the rates of the Mississippi Advisory & Inspection Rating Company, surely such use alone constitutes no violation of the law. This is true for the following reasons: A. The state of Mississippi had, as shown by the pleadings, incorporated such rating company for the specific purpose of selling such rates, and to so hold would convict the state not only of folly but of the rankest injustice. How could the state justify itself when it authorized its incorporators to incorporate such company for the purpose of selling such rate and advice, and then to penalize the purchaser (appellees) at the rate of five thousand dollars per day for purchasing such information, under the circumstances shown by this record? Cole v. State, 91 Miss. 650; German Alliance, etc. v. Kansas, 233 U. S. 411-420; New York Life Ins. Go. v. Deer Lodge Go., 231 U., S. 495; Paid v. Virginia, 8 Wall. 168, 19 L. Ed. 357; Ducas v. Chicago, 10 Wall. 410, 19 L. Ed. 972; Liverpool & Life & F. Ins. Co. v. Massachusetts (Liverpool & Life Ins. Go. v. Oliver), 10 Wall. 566, 19 L. Ed. 1029; Fire Asso. of Philadelphia v. New York, 119 U. S. 110, 30 L. Ed. 342, 7 Sup. Ct. Rep. 108; Hoopers. California, 155 U. S. 648, 39 L. Ed. 297, 5 Inters. Com. Rep. 610, 15 Sup. Ct. Rep. 207; Noble v. Mitchell, 164 ü. S. 367, 41 L. Ed. 472, 17 Súp. Ct. Rep. 110; New York 'L. Ins. Go. v. Cravens, 178 U. S. 389, 44 L. Ed. 1116, 20 Sup. Ct. Rep. 962; Nutting v. Massachusetts, 183 U. S. 553, 46 L. Ed. 324, 22 Sup. Ct. Rep. 238. We also call the court’s attention to the observations of Mr. Justice Lamar in his dissenting opinion in the case just quoted from, as follows: Insurance is not production; nor manufacture; nor transportation; nor merchandise. And this court in New York L. Ins. Go. v. Deer Lodge County, at the present term 231 U. S. 495, 58 L. Ed. 332, reaffirmed its previous ruling that insurance is not commerce, not an instrumentality of commerce, not a transaction of commerce, but simply contracts of indemnity against loss by fire. With this premise, Mr. Justice Lamar proceeds to argue in a forcible fashion that the state had no right to regulate the price of a private or personal contract but the point Ave are here stressing is the fact that in both the majority opinion and the dissenting opinion the business of providing insurance is recognized to be a service, whether private or public, and that in the furnishing of this service the .companies were not furnishing an article of trade or commerce. General Accident Fire and Life Assurance Go. v. Walker, 99 Miss. 408. This statute positively requires uniformity in rates of life insurance and prohibits class distinction or any discrimination in favor of individuals of the same class. Under this statute there may indeed be a competition in hustling for the service or in getting the business, but there can be no competition in the rates offered. There, can be no material distinction between the business of furnishing life insurance and the business, or preferably, the profession of rendering service for fire insurance; it is no longer a business but a profession. The theory of the bill in this cause is bottomed altogether upon the assumption that it is unlawful to have uniform rates for fire insurance and that if the companies are found to be furnishing fire insurance at uniform or standardized rates, an unlawful conspiracy must be implied. If we are correct in our contention that subdivision O of the- anti-trust statute forbids the furnishing of service-in one locality cheaper than in in another, then what are fire insurance companies to do without subjecting themselves to prosecution? We direct the court’s attention also to the fact that the latter clause of chapter 119, Laws of 1908, section 3282, Hemingway’s Code expressly provides: ¿‘And it shall be sufficient to make out a prima-facie case of the violation of subdivision O to show a lower charge for the services therein rendered in one locality than in another.” If the business of furnishing insurance, therefore, comes within the provisions of subdivision O, it is positively dangerous for the compánies-to charge a lower rate in one locality than another. There is a well-recognized basic rate of writing insurance. This basic rate is determined by the experiences of the companies on that ..class of property or that particular hazard. The basic rate for writing life insurance is based upon the mortality tables. In both instances the companies can only determine a basic rate by taking into account the long experience of mankind and gamble against the contingencies of the future by what the past reflects. D. Our court has held that merely becáuse a corporation delegates to or employs some other corporation to perform some of its duties, that this in itself is no violation of the anti-trust law. Y. & M. V. R. R. v. Jewries, 85 Miss. 520; Y. & M. V. R. B. v. Crawford, 102 Miss. 355; Covington v. Keith, 139 U. S. 128; 35 L. Ed. — E. Our anti-trust statute invoked by the complainant in this case was not intended to cover and does not cover any contracts or acts which would not hav§ been invalid under the common law. Cumberland Tel. Co. v. State, 100 Miss. 116; Sivley v. Cramer, 105 Miss. 13; Y. & M. V. R. R. Co. v. Crawford, 107 Miss. —; R. R. C'o. v. Searles, 85 Miss. 520; Telephone Co. v. State, 100 Miss. 102. This doctrine, as given in the Crawford case, 107 Miss. 355, stands today as a fundamental, cardinal rule of construction when determining in all cases whether an agreement or an alleged combination violates our anti-trust law. The arrangement, whatever it may be, must necessarily be inimical to the public welfare. The purpose of this review of the authorities is to point the court’s attention to the fact that there is absolutely no showing in this record that the public has been imposed upon. Nothing is charged, admitted or proven that injures the public. Continental Ins. Co. v. Board of Fire Underwriters of the Pac., 67 Fed. 310. In the case of Queen Ins. Co. et al. v. State of Texas, 22 L. R. A. 483, the supreme court of Texas expressly held as reflected by head note No. three: “It is not illegal at common law for insurance companies to make a combination to establish uniform rates of insurance and of commissions to agents.” In the Kentucky case of Louisville Board of Fire Underwriters v. Johnson, 119 S. W. 153, 24 L. R. A. (N. S.) 153, the syllabus reads: “A rule of a board of fire underwriters of a city organized to promote harmony and correct practice in fire underwriting, that no member shall take the agency of a company which is already represented in the city is not unreasonable, arbitrary or oppressive and violates no principle of public policy. To this case is appended in L. R. A. a note on “Legality of combination among underwriters.” Harris v. Commonwealth, 73 S. E. 561, 38 L. R. A. (N. S.) 458. 3. Our second proposition is this; It is not unlawful to have uniform insurance rates. Considering, therefore, that the companies are found using uniform rates, this, in itself, is consistent with good faith. We desire to make the additional point, that if the defendants are guilty at all they are guilty of a felony. In the note found in 2 American & Eng. Annotated Cases, pages 72, and 74, we find the following statement: “It has been held that where the determination of a question in a civil action involves the establishment of the fact that either party has been guilty of a criminal act, the other party, in order to obtain a determination of such question in his favor must overcome by a fair balance of testimony, not only the evidence introduced by the party so charged, but also the legal presumption of innocence, which exists in every case, citing authorities. So we maintain that the averments of the bill in this cause must not only be shown by a preponderance of the evidence, but even that they should be shown beyond a reasonable doubt.