Appeal from the Circuit Court of Cook county; the Hon. HARRY
M. FISHER, Judge, presiding. Reversed and remanded with
JUDGE FEINBERG DELIVERED THE OPINION OF THE COURT.
Rehearing denied October 3, 1956.
Defendant appeals from a decree entered by the Circuit Court, on an appeal taken by plaintiff from a report of the Director of Insurance of an examination made by him of the affairs of plaintiff, pursuant to § 744 of the Illinois Insurance Code, Ch. 73, Ill. Rev. Stat. 1953. The decree in effect affirms in part the report of the Director, reverses it in part and in other instances alters and deletes it in part. The decree also grants injunctive relief as provided by § 1019 (3) of the statute. Admittedly, over one hundred such amendments, alterations and deletions of the report appear in the decree. The power and authority of the Circuit Court to enter such a decree is directly challenged by this appeal.
It appears the Director of Insurance ordered an examination of plaintiff's assets, conditions and affairs for the period covering July 1, 1950, to and including June 30, 1952. The authority for such examination may be found in § 744 of the statute. Subsection (2) provides:
"Every company or person being examined, its officers and agents, shall produce at its office its books, records and documents and all or any papers in its or their possession relating to the property, assets, business or affairs of the company. The officers and agents of such company or person shall facilitate and aid in such examination so far as it is in their power to do so."
During the examination, plaintiff refused to allow the examination of an account marked "App." account, kept separate and distinct by plaintiff from its regular accounts. This account had reference to a plan conceived by its officers, whereby each of plaintiff's agents was required, with the acceptance of an application for insurance, to remit to the company $1 with each application, and placed by the company in a so-called welfare fund. Throughout the proceeding this account was designated the "App." account, and for convenience we shall refer to it as the "App." account. At the time of the examination, there was approximately three million dollars in this account.
Upon such examination witnesses were sworn and testified, and various exhibits received in evidence by the examiners. Upon the completion of the examination the examiners submitted to the Director the report of examination made by them, the evidence heard and exhibits received. The Director, pursuant to statute, served plaintiff on August 26, 1953, with a copy of the report, directing that objections thereto be filed with him within ten days. Several extensions of the time to file objections were granted, and on November 3, 1953, the objections to the report were filed with the Director.
The report of the Director dealt with many items that concerned the accounting methods of the company, some of its securities, and certain real estate carried on the books of the company as an asset. It appears from the report of the Director, with respect to the "App." account, that the minutes of the meetings of the directors and stockholders of the company disclose no provision or authority for the creation or operation of said fund; that the president of the company based his refusal to allow the examiners access to any of the books and records pertaining to this account upon a decree entered by the Circuit Court of Cook County in case No. 49 C 3063.
The suit referred to was instituted by MacArthur, the president of plaintiff, against his wife, and in a cross-complaint by her it was sought to establish the value of some stock in plaintiff company. She claimed that the "App." account was part of the assets of the company, and that said stock correspondingly had a greater value. The decree in that case found that the fund in question was for the purpose of promoting the health, safety and welfare of all employees and agents of the company, and not of such a nature as need be included in the financial statements of Bankers Life and Casualty Company; that it is not subject to the insurance regulations pertaining to the nature of investments by insurance companies, and not to be regarded as assets of the company. The instant decree finds that the account in question is not subject to the insurance laws.
Neither the State of Illinois, the Insurance Director, nor other agency of the State was a party to the decree in the suit referred to, nor does it appear that any notice was given them of the pendency of such suit or the hearing thereof. We think there was no justification for the refusal of the president of the company to allow the examination of the "App." account because he regarded said decree of the Circuit Court an adjudication that the fund could not be considered an asset of the plaintiff nor subject to any examination by the Director. In Hedlund v. Miner, 395 Ill. 217, it was held the doctrine of res adjudicata has no application against or in favor of anyone not a party or privy. It was there stated:
"The doctrine is bottomed on the ground that the party to be affected, or someone with whom he is in privity, has litigated or has had an opportunity to litigate the same matter in a former action in a court of competent jurisdiction."
To the same effect are Gillies v. Little Vermilion Special Drainage Dist., 401 Ill. 344, 349; In re Estate of Betts, 2 Ill. App.2d 453, and cases there cited.
Twenty-one specific objections were filed by plaintiff with the Director, as well as a general objection to the entire report based on the claimed violation of the duties and authority of the Director.
A hearing was had before the Director upon these objections, as provided by statute. He sustained some of the objections and overruled others. Thereupon plaintiff filed its appeal in the Circuit Court, together with a certified copy of the report of the Director and transcript of proceedings before him. It is admitted by the parties upon this appeal that the review by the Circuit Court of the report ...