ACT 3739.

An act to provide for proceedings against and liquidation of delinquent insurance corporations and associations.

[Approved April 30, 1919. Stats. 1919, p. 265.]

Amended 1921 (Stats. 1921, p. 1017).

§ 1. Application of act.

§ 2. Action by insurance commissioner for order to conduct business of domestic corporation.

§ 2a. Proceedings against delinquent insurance company.

Action by insurance commissioner in case of foreign corporations.
Injunction by court.

§ 4.

Liquidation by insurance commissioner.

§ 5.

Appointment of deputies, etc.

§ 10.

§ 11.

§ 12.

Rules and regulations.

Report to legislature on liquidated corporations.
Commissioner has powers of receiver.

Service of papers.

Transfer of place of business to San Francisco.

§ 13. Repealed. Option of commissioner.

§ 1. Application of act. This act shall apply to all corporations and associations which are subject to examination by the insurance commissioner, or which are doing or attempting to do or representing that they are doing the business of insurance in this state, or which are in the process of organization intending to do such business therein; and the words "corporation" or "corporations" herein shall also include all such associations, as well as all voluntary or unincorporated associations; provided, however, that nothing herein contained shall be construed to affect or to relate to any fraternal benefit society as defined in the act entitled "An act for the regulation and control of fraternal benefit societies," approved May 1, 1911, as amended.

§ 2. Action by insurance commissioner for order to conduct business of domestic corporation. Whenever any domestic corporation (a) is insolvent; or (b) has refused to submit its books, papers, accounts or affairs to the reasonable inspection of the insurance commissioner, or his deputy or examiner; or (c) has neglected or refused to observe an order of the insurance commissioner to make good within the time prescribed by law any deficiency, whenever its capital, if it be a stock corporation, or its reserve, if it be a mutual corporation, shall have become impaired; or (d) has, by contract of reinsurance or otherwise, transferred or attempted to transfer substantially its entire property or business, or entered into any transaction the effect of which is to merge substantially its entire property or business in the property or business of any other corporation or association without having first obtained the written approval of the insurance commissioner; or (e) is found, after an examination, to be in such condition that its further transaction of business will be hazardous to its policy-holders, or to its creditors, or to the public; or (f) has willfully violated its charter or any law of the state; or (g) whenever any officer thereof has refused to be examined under oath touching its affairs; or (h) if such corporation be organized under Chapter VI, Division First, Part IV, Title II of the Civil Code, or as a corporation to carry on the business of mutual livestock insurance upon the assessment plan, its condition is found,

after examination, to be such that it cannot meet the requirements for incorporation and authorization specified in the law relating thereto, the insurance commissioner may apply to the superior court, or any judge thereof, in the county in which the principal office of such corporation is located for an order directing such corporation to show cause why the insurance commissioner should not take possession of its property, and conduct its business, and for such other relief as the nature of the case and the interest of its policy-holders, creditors, and the public may require.

§ 2a. Proceedings against delinquent insurance company. Whenever it shall appear to the insurance commissioner that any person or corporation has committed any of the acts set forth in paragraph two of this act, and that any officer or attorney in fact of such corporation has embezzled or sequestered or wrongfully diverted to his or its own benefit any of the moneys, assets or securities of such corporation, and that irreparable loss and injury to the property and business of such corporation has or may occur unless the insurance commissioner take immediate charge of the property, business and affairs of such corporation, then and thereupon the insurance commissioner shall forthwith, without notice and before applying to the court for any order as herein provided, seize and take possession of the property and business of such person or corporation, its books, records and accounts and the offices and premises occupied by such corporation for the transaction of its business, and retain possession of the same subject to the order of the court; and for such purpose the insurance commissioner may require the aid of all peace officers to enforce such seizure and possession by the insurance commissioner.

Thereupon the insurance commissioner shall apply to the superior court, or any judge thereof, in the county in which the principal office of such corporation is located for the order provided for in section two of this act, and thereafter shall proceed in such application and in the disposition of the property, business and affairs of said corporation as herein. after in this act provided. [New section added May 31, 1921; Stats. 1921, p. 1017.]

§ 3. Injunction by court. On such application, or at any time thereafter, such court may, in its discretion, issue an injunction restrain; ing such corporation from the transaction of its business or disposition of its property until the further order of the court. On the return of such order to show cause, and after a full hearing, the court shall either deny the application or direct such insurance commissioner, or his successor in office, forthwith to take possession of the property and conduct the business of such corporation, and retain such possession and conduct such business until, on the application either of the insurance commissioner, or of such corporation, it shall, after a like hearing, appear to the court that the ground for such order directing the insurance commissioner to take possession has been removed and that the corporation can properly resume possession of its property and the conduct of its business.

§ 4. Liquidation by insurance commissioner. If, on a like application and order to show cause, and after a full hearing, the court shall order the liquidation of the business of such corporation, such liquida

tion shall be made by and under the direction of such insurance commissioner, and his successors in office, who may deal with the property and business of such corporation in their own names as insurance commissioners or in the name of the corporation, as the court may direct, and shall be vested by operation of law with title to all of the property, contracts and rights of action of such corporation as of the date of the order so directing them to liquidate. The filing or recording of such order in any county recorder's office of the state shall impart the same notice that a deed, bill of sale or other evidence of title duly filed or recorded by such corporation would have imparted. The rights and liabilities of any such corporation, and of its creditors, policyholders, stockholders and members, and of all other persons interested in its assets, shall, unless otherwise directed by the court, be fixed as of the date of the entry of the order directing the liquidation of such corporation in the office of the clerk of the county wherein such corporation had its principal office for the transaction of business upon the date of the institution of proceedings under this section.

§ 5. Action by insurance commissioner in case of foreign corporations. Whenever any of the grounds of jurisdiction over domestic corporations specified in subdivisions (a), (b), (c), (d), (e), (f) and (g) of section two of this act exist or arise with reference to any corporation incorporated by or existing under the government or laws of any country outside of the United States and authorized to transact the business of insurance and having assets in this state; or whenever any foreign corporation so authorized and having assets in this state has been placed in the hands of a receiver or had its property sequestrated in its domiciliary state or country or in any other state or country, the insurance commissioner may apply to the superior court or any judge thereof in the county in which such corporation has its principal office for the transaction of business in this state, for an order directing such corporation to show cause why the insurance commissioner should not take possession of its property and conserve its assets for the benefit of its creditors, and for such other relief as the nature of the case and the interests of its policy-holders, creditors, stockholders or the public may require.

§ 6. Injunction by court. On such application, or at any time thereafter, such court may, in its discretion, issue an injunction restraining such corporation and its officers, agents and employees from the transaction of its business or disposition of its property until the further order of the court. On the return of such order to show cause, and after a full hearing the court shall either deny the application or direct the insurance commissioner forthwith to take possession of the property and conserve the assets of such corporation, and retain such possession until, on the application either of the insurance commissioner, or of such corporation, it shall, after a like hearing, appear to the court that the ground for such order directing the insurance commissioner to take possession has been removed and that the corporation can properly resume possession of its property and conduct its business. If, on such application, the court shall direct the insurance commissioner to take possession of the property and conserve the assets of such corporation, the rights and duties of the said insurance commissioner with reference to such corporation and its said assets shall be those heretofore exer

cised by and imposed upon ancillary receivers of foreign corporations in this state.

§7. Appointment of deputies, etc. For the purposes of this act, the insurance commissioner shall have power to appoint, under his hand and official seal, one or more special deputy insurance commissioners, as his agent or agents, and to employ such counsel, clerks and assistants as may by him be deemed necessary, and give each of such persons such powers to assist him as he may consider wise. The compensation of such special deputy insurance commissioners, counsel, clerks and assistants, and all expenses of taking possession of and conducting the business of liquidating any such corporation shall be fixed by the insurance commissioner, subject to the approval of the court, and shall, on certificate of the insurance commissioner, be paid out of the funds or assets of such corporation. During the progress of any proceedings taken under this section, the insurance commissioner, his deputies or any examiner authorized by him and the special deputy insurance commissioner acting for the said insurance commissioner therein shall have all of the powers given to the insurance commissioner, his deputy or any examiner authorized by him, including the power to examine under oath the persons specified in such section, and to compel the production of books and papers as therein provided.

§ 8. Rules and regulations. For the purposes of this act, the insurance commissioner shall have power, subject to the approval of the court, to make and prescribe such rules and regulations as to him shall seem proper.

§ 9. Report to legislature on liquidated corporations. The insurance commissioner shall transmit to the legislature, in his biennial report, the names of the corporations so taken possession of, whether the same have resumed business or have been liquidated, and such other facts as shall acquaint the policy-holders, creditors, stockholders and the public with his proceedings under this act; and, to that end, the special deputy insurance commissioner in charge of any such corporation shall file annually with the insurance commissioner a report of the affairs of such corporation.

§ 10. Commissioner has powers of receiver. In all cases arising under the provisions of this act where not otherwise provided the powers and duties of the insurance commissioner with relation to the property and assets and business of any corporation placed under his control shall be those heretofore exercised by and imposed upon receivers of corporations within this state.

§ 11. Service of papers. The order to show cause and the papers upon which the same is made in any proceeding instituted under the provisions of this act shall be served upon the corporation named in such order in the manner prescribed by law for personal service of sumnons upon a domestic corporation. When it is satisfactorily proved by affidavit that the officers of the corporation named in the said order to show cause, upon whom service is required to be made as above provided, or, if a Lloyds association or interinsurance exchange be named in the order to show cause, the duly designated attorney in fact, have departed from the state or keep themselves concealed therein with intent to avoid service, such order to show cause may provide for ser

vice thereof in such manner as the court or judge by whom the same is made, shall direct.

§ 12. Transfer of place of business to San Francisco. At any time after the commencement of proceedings under an order of liquidation made pursuant to this section, the said insurance commissioner may remove the principal office of the corporation in liquidation to the city and county of San Francisco. In event of such removal the court shall, upon the application of the insurance commissioner, direct the clerk of the county wherein such proceeding was commenced to transmit all of the papers filed therein with such clerk to the clerk of the county of San Francisco, and the proceeding shall thereafter be conducted in the same manner as though it had been commenced in the city and county of San Francisco.

§ 13. Repealed. Option of commissioner. All acts and parts of acts inconsistent with the provisions of this act are hereby repealed; provided, however, that it shall be optional with the insurance commissioner in any appropriate case to proceed in the manner herein provided or in accordance with the provisions of section six hundred four of the Political Code.

ACT 3740.

An act regulating the appointment of the agents or employees of state banks and subsidiary corporations dominated or controlled by state banks as insurance agents and prohibiting the appointment of the agents or employees of state banks and subsidiary corporations Hominated as controlled by state banks as general insurance agents or managerial agents or department managers of certain insurance companies. [Approved May 27, 1919. Stats. 1919, p. 1285. In effect July 27, 1919.]

This act was defeated on a referendum of it at an election held November 2, 1920. See Stats. 1921, lxxxviii.

ACT 3741.

An act providing that any corporation organized under the laws of the state of California furnishing to members, policy-holders or beneficiaries mutual insurance upon the assessment plan, including fraternal benefit societies, may deposit with the insurance commissioner securities in trust for the benefit of members, policy-holders and beneficiaries whenever the laws of any state of the United States, or of any country foreign to the United States, require such deposit as a prerequisite for transacting business in such other state or foreign country, said deposits to be subject to laws governing deposits of securities by standard insurance companies.

[Approved June 3, 1921. Stats. 1921, p. 1605. In effect August 2, 1921.] § 1. Deposit of securities by mutual insurance companies. § 2. Deposit in state treasury.

§ 1. Deposit of securities by mutual insurance companies. Whenever the laws of any state of the United States, or of any country foreign to the United States, require any corporation organized under the laws of this state, furnishing mutual insurance to members, policy-holders or beneficiaries upon the assessment plan, including fraternal benefit