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Sunderland v. Day

AUGUST 13, 1956.

GLENN H. SUNDERLAND, DOING BUSINESS AS AMBRAW FINANCE COMPANY, A LICENSEE UNDER SMALL LOANS ACT, PLAINTIFF-APPELLEE, AND CROSS-APPELLANT,

v.

J. EDWARD DAY, DIRECTOR OF INSURANCE OF STATE OF ILLINOIS, AND DIRECTOR OF DEPARTMENT OF INSURANCE OF STATE OF ILLINOIS, DEFENDANT-APPELLANT, AND CROSS-APPELLEE.



Appeal from the Circuit Court of Sangamon county; the Hon. DEWITT S. CROW, Judge, presiding. Decree reversed in part and affirmed in part.

PER CURIAM.

Rehearing denied October 2, 1956.

On December 6, 1951, plaintiff Glenn H. Sunderland d/b/a Ambraw Finance Co., a licensee under the Small Loans Act, filed a suit for a declaratory judgment pursuant to Sec. 57 1/2 of the Civil Practice Act (Ill. Rev. Stat. 1951, Chapter 110, paragraph 181.1) against the Director of the Department of Insurance of the State of Illinois. In his third amended complaint, upon which the case was finally heard, he alleged in substance, that he was a licensee under the Small Loans Act conducting a business in Jasper County; that he has from time to time made loans secured by chattel mortgages on personal property; that he has required borrowers, as a condition precedent to making such loans, to provide adequate insurance on said personal property with an appropriate loss payable clause; that to assist the borrower, he desires to use a requisition for insurance on such property to be signed by the borrower specifying the amount and kind of insurance and the name of the insurance company through whom the borrower desires the insurance to be issued; that he is prevented from using said requisition form by reason of Rule 15 of the Rules and Regulations effective October 1, 1950 governing the execution and enforcement of the Small Loans Act; that plaintiff has not directly or indirectly received any part of any insurance premium paid by a borrower for insurance on personal property. The third amended complaint also alleges that plaintiff desires to use credit life insurance as security for small loans and to require prospective borrowers to purchase, at their expense, as a condition precedent to the making of the loan, credit life insurance of either full coverage level term life or monthly decreasing term life in an amount equal to the principal of the loan and for a term co-extensive with the term of the loan; that he desires to use a requisition form similar to that above mentioned; that he is prevented from requiring credit life insurance as security or from taking the requisition by Rule 15 above. The complaint further alleges that pursuant to Section 21 of the Small Loans Act the Department of Insurance of Illinois on October 1, 1950 promulgated Rule 15 which is as follows:

"(a) No licensee shall solicit insurance nor take any application, requisition or request for insurance in connection with any loans to borrowers.

"(b) No insurance premium may be taken, contracted for or received by the licensee in connection with any loans to borrowers.

"(c) No borrower shall be required to purchase life insurance as a condition precedent to a loan, and no borrower shall be required to purchase any policy of insurance from any certain company, agent, broker, or person as a condition precedent to a loan."

and is enforcing said rule against him; that paragraph (c) of Rule 15 is unwarranted by any provision of the Small Loans Act and that said act does not prohibit plaintiff from requiring a borrower to furnish either property or credit life insurance as a condition precedent to making a loan and that said paragraph violates various sections of the State and Federal Constitutions. The complaint prays that paragraphs (a), and that portion of paragraph (c) which prohibits requiring a borrower to purchase life insurance as a condition precedent to a loan, of Rule 15 be declared invalid and of no force and effect; in the alternative, that if Rule 15 be adjudged to be authorized by the fourth paragraph of Section 12 of the Small Loans Act that then in that event said paragraph of Section 12 be declared unconstitutional; and that an injunction issue against the Department of Insurance enjoining the enforcement of the portions of Rule 15 above.

The Attorney General, answering for defendant, put in issue the sole questions as to the validity of paragraph (a) of Rule 15 and that part of paragraph (c) which prohibits credit life insurance as a condition precedent to a loan.

Plaintiff was the only witness who testified and his testimony tends to support the allegations of his complaint not otherwise admitted by answer. Since we deem the question involved to be largely one of law a more detailed statement of plaintiff's testimony is not considered necessary.

The Circuit Court entered a final decree adjudging paragraph (a) of Rule 15 to be valid and within the power vested in the Department of Insurance; adjudging that plaintiff was entitled as a matter of right to require a borrower to purchase credit life insurance, as a condition precedent to making a loan, and that that portion of paragraph (c) of Rule 15 prohibiting such practice was invalid and beyond the power vested in the Department of Insurance; adjudging the fourth paragraph of Section 12 of the Small Loans Act to be constitutional; and ordering a permanent injunction against enforcement of that portion of paragraph (c) above of Rule 15. The defendant has appealed from that portion of the decree declaring part of paragraph (c) of Rule 15 invalid and plaintiff has cross-appealed from that portion of the decree declaring paragraph (a) of Rule 15 valid.

We have been furnished with exhaustive briefs by both appellant and appellee. In addition we have granted Beneficial Management Corp. leave to file a brief as Amicus Curiae. Household Finance Corp. has filed a brief in Cause No. 10064 pending in this court covering, among other matters, the matters here involved and the Attorney General appearing for defendant and appellant has adopted the pertinent portions of said brief. These briefs have all been considered by this court.

The sole question before this court is whether those parts of Rule 15 providing that

(a) No licensee shall solicit insurance nor take any application, requisition or request for insurance in connection ...


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