Carl Herschel BONHAM, Petitioner and Appellant, v. F. Britton McCONNELL, Insurance Commissioner of the State of California, substituted for John R. Maloney, Insurance Commissioner of the State of California, Respondent.
Petitioner, Carl Herschel Bonham, the holder since 1937 of licenses to act as an insurance broker, insurance agent and as a life and disability agent, was charged with a series of misrepresentations alleged to have been made by him to various persons in the solicitation and sale of hospital and disability insurance in violation of several subdivisions of section 1731 of the Insurance Code. The hearing officer found that, pursuant to a general scheme to defraud, many such violations had occurred and recommended that Bonham's licenses be revoked. The findings and recommendation of the hearing officer were adopted by the Insurance Commissioner in toto. Upon petition for a writ of mandate the Superior Court, exercising its independent judgment on the facts, found that all but three of the misrepresentations found to have been made by the hearing officer were supported by the weight of the evidence, and determined that the findings of the hearing officer that were supported by the weight of the evidence were sufficient to support the Commissioner's order revoking the licenses, and denied the writ of mandate. Bonham appeals, making no attack on the sufficiency of the evidence, his sole contention being that, inasmuch as the Superior Court found that three out of the many adverse findings were unsupported, the court was required, as a matter of law, to return the case to the Commissioner for a reconsideration of the penalty.
The facts are as follows: In September of 1949 Bonham conceived the idea of selling a group plan of hospital, surgical, and medical expense insurance to the members of the Apartment House Association of Alameda County. He discussed his project with the Constitution Life Insurance Company, and was told by the representatives of that company that the company would be glad to underwrite such a group policy if a sufficient percentage of the group membership necessary to meet legal and underwriting requirements could be signed up. The representative of the company doubted that Bonham could secure a sufficient sign up from this association to qualify for a group policy, and he suggested that Bonham should take applications for individual policies that could later be merged into the group plan if a sufficient number qualified. The basic difference between group and individual disability insurance is that with group disability insurance the insured's pre-existing physical condition is disregarded after the policy becomes effective, while individual disability insurance is not issued to cover a pre-existing condition, and misrepresentations as to such condition will void the policy.
Bonham engaged in a campaign to sell the members of the association insurance policies covering medical, surgical, and hospital expense. During this campaign he made the series of misrepresentations involved in this proceeding. The charges and findings are most detailed. The findings disclose that Bonham engaged in a scheme to sell to various members of the association individual policies, representing falsely that they were group policies. He also inserted false answers on the applications of some of the applicants. It is found that, pursuant to this scheme, at a convention of the Apartment House Association in San Francisco, he solicited generally the members, employees and dependents of the association to subscribe to a group plan of disability insurance and pointed out to them the advantages of group over individual insurance. A few days later at the office of the Alameda County Association he stated that the Constitution Life Insurance Company offered, and would provide, a group plan of insurance for the members of the association that would not be available to other persons, and that this type of insurance was cheaper than individual insurance. He also told six members, to induce them to subscribe, that a certain union in Los Angeles had a group plan similar to the one he was offering, and was satisfied with it. This representation was false inasmuch as the members of the union in fact did not have a group policy. He told a committee of the association appointed to consider the plan that it was a group plan and that the savings over individual policies would be substantial. He represented to a meeting of association members called to consider the plan that it was a group plan, and then left advertising material with applications attached for individual policies, and a pamphlet describing the life insurance group plan for the Los Angeles Apartment House Owners Association. A few days later he left with the manager of the association a galley proof of a form of a policy issued by the Constitution Life Insurance Company, representing that it was a group policy prepared by the company for the association members. In fact, the policy was an individual one and the company had no such group plan for these members. He also misrepresented the rates called for by this policy to be $3.50 per month per adult, when in fact the rate called for was $2.50. He delivered to the secretary of the manager of the association for mailing to the membership an announcement of the group plan, summarizing its benefits. He then solicited and sold individual policies to various members of the association, falsely representing that they were group policies costing less than individual policies. All purchased in the belief induced by Bonham that they were getting group policies. The Superior Court found, and such findings are not challenged, that such sales and such representations were made to Robert Snell, manager of the association, to C. H. McCaslin, its president, who purchased two such policies, and to Mabel Britt, Helen Miebach, Grace Goodwin and George Adelson. The Superior Court also found that after Mrs. Goodwin purchased her policy, she had an operation for a condition that existed at the date of the policy which would have been covered under a group policy but on which the insurance company denied liability under the terms of the individual policy purchased by her. In the sale to Mrs. Miebach of the policy, which also covered her husband, in response to the question whether her husband had high blood pressure, Mrs. Miebach told Bonham that her husband suffered this affliction, and also had been treated for it. Bonham nevertheless wrote ‘No’ on the application. Later, Mr. Miebach contracted pneumonia, but the policy was rescinded and his claim denied because of this false answer on the application. Bonham also solicited from Mrs. Miebach a policy on her son-in-law, and asked her the answers to the questions on the application knowing she did not have full and complete information, and then induced her to sign her son-in-law's name. This application contained answers known by Bonham to be untrue.
The hearing officer also found that similar misrepresentations were made to Bentley, Bessette and Spongberg. These findings the trial court held were not supported by the weight of the evidence.
The sufficiency of the evidence to support the findings of the trial court is not challenged. The sole contention is that because the trial court found that the representations made to Bentley, Bessette and Spongberg were unsupported, that court should have, in view of the findings and as a matter of law, sent the case back to the commissioner for a reconsideration of the penalty.
The law on this subject is by no means clear. Prior to the adoption of section 1094.5 of the Code of Civil Procedure in 1945 it had been held that the courts on either certiorari or mandamus, were limited to the determination of whether the administrative board had exceeded its jurisdiction. So far as the penalty imposed by the administrative board was concerned, this meant that however drastic the penalty appeared to the reviewing court it had no power to modify the punishment if it was within the jurisdiction of the board to impose. In such a situation, if all the charges made by the board were supported by the evidence, the court had to affirm. Painless Parker v. Board of Dental Examiners, 216 Cal. 285, 14 P.2d 67; Fuller v. Board of Medical Examiners, 14 Cal.App.2d 734, 59 P.2d 171. In Rinker v. State Board of Medical Examiners, 59 Cal.App.2d 222, 138 P.2d 403, decided in 1943, the petitioner had been charged with two counts of unprofessional conduct involving abortions. The appellate court found that the evidence was sufficient to sustain one count, and in denying the petition for a writ of mandate held that it was not necessary to consider the evidence on the other count because ‘if the evidence is sufficient to sustain the charge in either of these counts the judgment [revoking a license] must be affirmed.’ 59 Cal.App.2d at page 223, 138 P.2d at page 403. Then, in 1944, came the case of King v. Board of Medical Examiners, 65 Cal.App.2d 644, 151 P.2d 282. There the board found that petitioner had committed three acts of misconduct. The Superior Court found that the two main charges were unsupported, but that the third, a mere technical violation, was supported. It held that revocation of the license based solely on the third charge was unjustified, that the board had been unfair and arbitrary, and reversed the revocation. The appellate court affirmed, holding that while disciplinary action is vested in the administrative agency, and the court ‘is without power to substitute its discretion for that of the Board in matter of form of discipline to be imposed’, 65 Cal.App.2d at page 652, 151 P.2d at page 283, the court could control an abuse of discretion.
In 1945 section 1094.5 of the Code of Civil Procedure was enacted purporting to regulate the scope of review by the courts in mandamus proceedings. Subdivision (b) of that section provides: ‘The inquiry in such a case shall extend to the questions whether the respondent has proceeded without, or in excess of jurisdiction; whether there was a fair trial; and whether there was any prejudicial abuse of discretion. Abuse of discretion is established if the respondent has not proceeded in the manner required by law, the order or decision is not supported by the findings, or the findings are not supported by the evidence.’
Subdivision (e) of the section provides: ‘The court shall enter judgment either commanding respondent to set aside the order or decision, or denying the writ. Where the judgment commands that the order or decision be set aside, it may order the reconsideration of the case in the light of the court's opinion and judgment and may order respondent to take such further action as is specially enjoined upon it by law but the judgment shall not limit or control in any way the discretion legally vested in the respondent.’
Under this section two lines of authority have been developed. One line of cases is illustrated by Hohreiter v. Garrison, 81 Cal.App.2d 384, 184 P.2d 323. There the commissioner revoked petitioner's insurance license because of six charges of misrepresentation. All six were upheld by the Superior Court. On appeal the appellate court also held that all six were supported. In so holding, the court stated, 81 Cal.App.2d at page 388, 184 P.2d at page 325: ‘We are of the opinion that the evidence amply supports the findings that appellant violated the law as charged in all six counts, but it should be pointed out that if the evidence substantially supports any one of the six points, the insurance commissioner was empowered, under section 1731 of the Insurance Code, to revoke the license, and this court would have no power to reverse the decision of the trial court.’
A somewhat similar holding is found in Genser v. State Personnel Board, 112 Cal.App.2d 77, 245 P.2d 1090. There the Board found petitioner guilty of six counts of misconduct. The Superior Court reversed on the ground of insufficiency of evidence. The appellate court found that two of the charges were supported, and reversed the lower court. In discussing the penalty the court stated, 112 Cal.App.2d at page 88, 245 P.2d at page 1097: ‘It is clear that the Board intended to exact the penalty imposed on each count of the charges, and in view of the fact that we have reached the conclusion that the findings as to the first two charges are supported by substantial evidence, it is unnecessary to discuss at any length the remaining charges and findings. The State Personnel Board here has done what in effect a court does when a defendant in a criminal prosecution is convicted on a number of counts and decrees that the sentences shall run concurrently. The rule in criminal law is that where one is convicted on two counts and sentenced thereon, the sentences to run concurrently, a subsequent invalidation of the conviction on one count will not secure the release of the defendant. [Citing a case.] So even if we should find that any or all of the remaining charges and findings are not supported by substantial evidence, we would still be required to reverse the judgment requiring appellant Personnel Board to set aside its decision.’
Concurrently with these cases a different line of authority developed. These cases are well illustrated by Cooper v. State Board of Medical Examiners, 35 Cal.2d 242, 217 P.2d 630, 18 A.L.R.2d 593. There the Board revoked a license based on two charges of unprofessional conduct. The Superior Court held both charges supported by the evidence. The Supreme Court found one of the charges unsupported. It held, 35 Cal.2d at page 252, 217 P.2d at page 636: ‘The board made a single order of license revocation based on its findings and conclusions that both count seven and count nine had been violated. Inasmuch as we hold that the findings do not support the conclusions of unprofessional conduct as to count seven, and since license revocation is in any event a drastic penalty, and, furthermore, in consideration of the fact that we have no means of knowing whether the board itself would have imposed so severe a penalty for violation of count nine alone, we are of the view that the judgment should be reversed with directions to the trial court to set aside the order and send the matter back to the board for reconsideration of the penalty.’ Similar holdings are to be found in Jones v. Maloney, 106 Cal.App.2d 80, 234 P.2d 666, and Nelson v. Department of Corrections, 110 Cal.App.2d 331, 242 P.2d 906.
In Garfield v. Board of Medical Examiners, 99 Cal.App.2d 219, 221 P.2d 705, a one-year suspension was imposed by the Board upon finding that petitioner had committed two acts of unprofessional conduct. The Superior Court reversed. This court found the minor charge supported and the major one unsupported. Under such circumstances because ‘we have no way of knowing what penalty the board would have imposed for violation of count I alone, the judgment will have to be reversed and the matter sent back to the board for reconsideration of the penalty. [Citing the Cooper case.]’ 99 Cal.App.2d at page 231, 221 P.2d at page 713.
In Stoumen v. Reilly, 37 Cal.2d 713, 234 P.2d 969, a liquor license was revoked upon the board finding two charges of misconduct supported. The Superior Court denied a writ of mandate. The Supreme Court found one charge of selling liquor to a minor aged 20, supported, but the other charge of permitting the licensed premises to be used as a disorderly house unsupported. The court stated, 37 Cal.2d at page 717, 234 P.2d at page 971: ‘A separate penalty was not assessed for this offense, the order of indefinite suspension being based upon the finding that plaintiff had violated both sections 58 and 61(a). * * * It appears that the usual punishment imposed under such circumstances varies from a reprimand to a limited suspension of not more than thirty days. Since it does not seem likely that plaintiff's license would have been suspended for an indefinite period on this charge alone, the matter should be remanded to the board.’
These two lines of authority are not necessarily inconsistent, although it is somewhat difficult to reconcile some of the language of the various cases. We interpret the cases to mean that the questions of the quantum and nature of the penalty are ones for the administrative board, and that its determination can be upset only where an abuse of discretion appears. Where all the charges found by the board are held to be supported by the courts, the board's penalty will seldom be interfered with except in the rare case where the penalty is so excessive as compared with the offense that an abuse of discretion is apparent as a matter of law. The difficulty comes in those cases where multiple charges of misconduct are found by the board to have been committed and the board imposes a single penalty for all offenses, and the courts hold that some of them are unsupported. Then the proper rule to be followed depends upon the sense of fairness and common sense of the appellate courts. If the unsupported charges are minor and the supported ones are major in nature, and of a character to alone support the penalty, and where it appears reasonably certain that the penalty would have been imposed regardless of the unsupported charges, the courts will affirm and not send the case back for a reassessment of the penalty. On the other hand, where the unsupported charges constitute a major or important part of the charges as a whole, and where it appears certain or even reasonably probable that the penalty imposed would not have been imposed solely for the supported charges, then the case will be remanded to the board for a reassessment of the penalty.
How do these rules apply in the instant case? Here the Commissioner found that petitioner had falsely engaged in a general scheme or plan of trying to sell to the members of the association individual policies, and knowingly misrepresented these policies to be group policies possessing the additional benefits of such policies. All of the basic steps charged to have been taken by Bonham in carrying out this scheme the Commissioner found supported. The Superior Court made similar findings, and these findings are in no way challenged on this appeal. Likewise, in several instances, the Commissioner found Bonham deliberately inserted false answers on the applications that adversely affected the insured. These findings were upheld by the Superior Court and are not challenged on this appeal. The majority of the sales to individual members found by the Commissioner to have been secured by the false representation that the policies were group policies were upheld by the Superior Court and are not challenged on this appeal. The only charges held not to be substantiated were the charges that he misrepresented the nature of the policy or its date of effectiveness to Bentley, Bessette and Spongberg. These were minor parts of the whole charge. The whole basic scheme and plan to defraud still stands unchallenged, as do the findings as to a majority of the individual sales, as well as those relating to the false answers. Reading the record as a whole it is apparent that the Commissioner did not consider each sale of a policy a separate isolated event, but considered all the sales as being related and integrated parts of a plan or scheme to defraud. The substance of that plan was overwhelmingly proved. The Superior Court knocked out three details, but the substance of the scheme to defraud remains. This being so, it would be an idle act to remand the case to the Commissioner for a reassessment of the penalty. It cannot be reasonably argued that if the case were remanded there is any reasonable probability that there would be a change in penalty. There is no reasonable basis for the argument that the penalty was in any way affected by the unsupported charges. The penalty of revocation of this man's licenses held by him since 1937, is undoubtedly a severe one and extremely serious to him, but so are the charges found to be supported. Under the circumstances we cannot interfere with the discretionary order of the Commissioner or require him to reconsider his ruling.
The judgment appealed from is affirmed.
PETERS, Presiding Justice.
BRAY and FRED B. WOOD, JJ., concur.