IN THE COURT OF CRIMINAL APPEALS OF TENNESSEE
AT KNOXVILLE FILED
APRIL 1997 SESSION
September 10, 1998
Cecil Crowson, Jr.
Appellate C ourt Clerk
) C.C.A. No. 03C01-9610-CR-00360
)
) LOUDON COUNTY
)
IN RE: ) HON. E. EUGENE EBLEN, JUDGE
INTERNATIONAL FIDELITY )
INSURANCE COMPANY )
)
)
FOR THE APPELLANT: FOR THE APPELLEE:
JOHN K. KING JOHN KNOX WALKUP
ALAN M. PARKER Attorney General and Reporter
P. O. BOX 2425
Knoxville, TN 38901 MICHAEL J. FAHEY, II
Assistant Attorney General
450 James Robertson Parkway
Nashville, TN 37243-0493
CHARLES E. HAWK
District Attorney General
FRANK A. HARVEY
Assistant District Attorney General
P. O. BOX 703
Kingston, TN 37763-0703
OPINION FILED:
REVERSED AND REMANDED
CHRIS CRAFT,
SPECIAL JUDGE
OPINION
International Fidelity Insurance Company appeals as of right the entry of an
order summarily denying it permission to underwrite bail bonds in Loudon County due
to its failure to deposit funds with the Loudon County Court Clerk pursuant to a local
rule of court. Appellant presents two issues for our review: (1) whether the State
Commissioner of the Department of Commerce and Insurance is mandated by statute
to be the regulating authority of insurance companies doing business in Tennessee,
thus preempting the authority of the local courts, and (2) whether a local court has the
authority to require additional local cash deposits over and above the $100,000
required by statute to be made to the state, even though the insurance company is
found to be solvent and otherwise qualified by the State Commissioner of the
Department of Commerce and Insurance to do business in the courts of this state. For
the reasons stated in this opinion, we set aside the order of the trial court denying the
petition and remand this cause for a hearing on the merits.
THE HEARING ON THE PETITION
Appellant insurance company filed a petition in Loudon County to qualify as a
bail bondsman through its exclusive authorized agency, Sanford and Sons Bail Bonds,
Inc. On the date of the hearing on the petition, counsel for the insurance company
indicated by way of an opening statement that the company had filed a proper petition,
with affidavits in support, and that the state had filed no opposition to its request.
Therefore, since the company was qualified by the Commissioner of Commerce and
Insurance to do business underwriting bail bondsmen in the State of Tennessee,
appellant asked the Court to grant the petition. In addition to its affidavits, the
company had witnesses present and ready to testify if either the state or the trial court
had any question as to solvency. The state responded that it did not question the
solvency of the company, but did have doubts about the fitness of Mr. Hite J. Sanford,
Jr., owner of Sanford and Sons Bail Bonds, Inc., and produced a certified copy of a
court order from Blount County Circuit Court indicating that Mr. Sanford had made
illegal payoffs to the sheriff of Blount County in order to make bonds. The trial judge
then asked appellant, sua sponte,
2
THE COURT: Is Mr. Sanford in a position to post the $50,000 cash for
the first county and 25 cash with the clerk for each adjoining county?
MR. PARKER: Your Honor, we’d like to make clear that the bonds that
are underwritten through Sanford --
THE COURT: That is not my question. Answer my question and then
you can explain anything you want to answer. These are not under oath, but
we’ll proceed that way.
MR. PARKER: Well, Your Honor, we don’t think that such a requirement
should be placed upon International Fidelity who actually issues the bonds.
The bonds in this case are --
THE COURT: You do realize that is part of the rules of this district, and
all the other bonding companies have posted their money?
MR. PARKER: Your Honor, I take it that you say that is the rule and --
THE COURT: Those rules are on record in all the clerks’ offices.
MR. PARKER: Your Honor, our position is that that rule shouldn’t apply
to a corporate surety that is regulated by the Department of Commerce and
Insurance that has met all the requirements of the State of Tennessee that has
made deposits.
THE COURT: Still haven’t answered my question.
MR. KING: And the question was, Your Honor?
THE COURT: Is Mr. Sanford, Sanford & Sons Bonding Company,
prepared to post $50,000 for the first county and 25 for each adjoining county
he wishes to bond in?
MR. KING: No, Your Honor. It’s our position that he should not be
required to do so.
THE COURT: The Court will have [the Blount County order regarding Mr.
Sandford] marked as an exhibit, and we’ll take the case under advisement, and
we’ll note -- give you notice sometime during the January [term].
MR. KING: Does Your Honor want to hear any proof with regard to the
issue of solvency of the applicant, the petitioner in this case?
THE COURT: I think that the insurance company is solvent.
MR. KING: So can we have then, Your Honor, the essence of finding by
the Court that International Fidelity Insurance Company meets all the solvency
requirements and do I understand then that there is --
THE COURT: No. You can’t have such a finding.
To make a record, appellant then gave an oral summary of his witnesses’
testimony, by way of an offer of proof as to solvency, and had several documents
marked as exhibits for the record. After taking the matter under advisement for five
months, the trial judge entered an order summarily denying the petition, which stated
that
The petition for qualification for Bail Bondsman is denied because of the
failure to comply with the local rules of depositing cash with the Clerk of the
Court.
All other matters, including the fitness of the agent, are reserved for any
future hearing.
The insurance company appeals from the dismissal of its petition.
AUTHORITY OF LOCAL COURTS TO REGULATE BONDING COMPANIES
Appellant first argues that the State Commissioner of the Department of
3
Commerce and Insurance is mandated by Tenn. Code Ann. §56-15-101, et seq.
(1994), to be the regulating authority of insurance companies doing business as
bonding companies in Tennessee, thus preempting the authority of the local courts to
also impose their own regulations. However, this Court previously decided this issue
against appellant in In Re Hitt, 910 S.W.2d 900 (Tenn. Crim. App. 1995). In that case
we held that
it is the trial court's function to regulate the professional bondsmen that
execute bonds in its court, and it may impose reasonable limitations on
the total liability of such bondsmen's undertakings in that court. [T.C.A.
§§ 40-11-302--306]. Further, a trial court has the inherent power to
administer its affairs, including the right to impose reasonable
regulations regarding the making of bonds. Taylor v. Waddey, 206 Tenn.
497, 334 S.W.2d 733 (1960).
Hull v. State, 543 S.W.2d 611, 612 (Tenn. Crim. App. 1976). In other words, the
trial court is given wide discretion in its regulation of bail bondsmen and its
actions will not be overturned absent a showing that they were arbitrary,
capricious or illegal. Taylor v. Waddey, 206 Tenn. 497, 504, 334 S.W.2d 733,
736 (1960). Moreover as Taylor notes, the fact that the legislature has enacted
statutes dealing with bail bondsmen and their regulation does not in any way
interfere with the inherent powers of regulation possessed by the court to act
in addition to the statutes. Id.
In Re Hitt, supra, at 903-904. Therefore, statutory authority given the executive branch
of government to regulate insurance companies does not preempt the inherent power
of the judicial branch to supervise the orderly administration of the courts, which
includes the imposition of reasonable regulations regarding the making of bail bonds.
This issue is without merit.
AUTHORITY TO REQUIRE ADDITIONAL DEPOSITS
Appellant next suggests that since Tenn. Code Ann. §56-15-105 (1994)
requires that a $100,000 deposit must be made with the State Commissioner of
Commerce and Insurance before any surety company is authorized to execute bonds
in this state, attempts by a local court to require that additional funds must be
deposited locally by the surety before it can be allowed to execute bonds in that judicial
district is in direct conflict with state law. This Court finds no such conflict. Our
Supreme Court, in In Re: Indem. Ins. Co. of North America, 594 S.W.2d 705 (Tenn.
1980), held that
It is true, as pointed out by the appellant, that insurance companies which
qualify under T.C.A. §§ 56-1401 to 1415 [now §§56-15-101 to 115] are required
to post assets with the Department of Insurance in this state, or with similar
4
officials in other states, which are subject to being reached by local courts to
satisfy bail bond obligations. Ordinarily an insurance company which complies
with these statutes should not be required to file additional assets with local
courts in the absence of a finding by local judges of specific reasons therefor.
We agree with counsel for appellant that the statutory scheme provided by the
insurance laws ordinarily should afford sufficient ready, liquid assets to satisfy
the obligations of an insurance carrier writing bail bonds....
Nevertheless, ... there can be no question, in our opinion, of the legal
authority of local courts to require the posting of additional assets to secure bail
bond obligations of any professional bondsman, insurance carrier or otherwise.
Id. at 708 (emphasis supplied). Therefore, Tenn. Code Ann. §56-15-105 (1994) does
not prohibit a trial court of this state from requiring the posting of additional assets
locally, provided the court sets out specific reasons for its ruling.
In the denial of the instant petition, the only reason given by the trial judge in his
order was the insurance company’s “failure to comply with the local rules of depositing
cash with the Clerk of the Court.” He gave no specific reason why the additional
deposit was needed, other than that a local rule required it. No copy of that local rule
was included in the record on appeal.
It is well settled that the trial courts of this state have the authority to make and
implement reasonable local rules of practice and procedure in their respective courts,
as long as these local rules do not conflict with a substantive rule of state law. Richie
v. Liberty Cash Grocers, Inc. 63 Tenn. App. 311, 471 S.W.2d 559, 560 (Tenn. App.
1971); Brown v. Daly, 884 S.W.2d 121, 123 (Tenn. App. 1994); Pettus v. Hurst, 882
S.W.2d 783, 786 (Tenn. App. 1993). "No rule of court is ever effective to abrogate or
modify a substantive rule of law," however. Brown, 884 S.W.2d at 123. The
substantive rule of law to be followed in this case is that ordinarily, “an insurance
company which complies with [Tenn. Code Ann. §§56-15-101 to 115] should not be
required to file additional assets with local courts in the absence of a finding by local
judges of specific reasons therefor.” In Re: Indem. Ins. Co. of North America, supra,
at 708. Therefore, a local rule of law that would require the deposit of additional funds
before a petition to qualify could be heard would be null and void ab initio to the extent
that it conflicts with the substantive right of the insurance company to have a hearing
on the merits, and the right to be required to put up additional funds only upon a
finding by the trial judge of specific reasons therefor.
On appeal, “the trial court is given wide discretion in its regulation of bail
5
bondsmen and its actions will not be overturned absent a showing that they were
arbitrary, capricious or illegal.” Taylor v. Waddey, 206 Tenn. 497, 504, 334 S.W.2d
733, 736 (1960), cited in In Re Hitt, supra, at 904. “Arbitrary and capricious” has
been defined in part as an "unreasoning action, without consideration and in disregard
of the facts or circumstances of the case.” Wright v. Bd. of Dispensing Opticians, 759
S.W.2d 929, 932 (Tenn. Ct. App. 1988); see also Black’s Law Dictionary 105 (6th ed.
1990). From the sparse record before us it appears the trial judge made the following
of the local rule a prerequisite to the hearing of the petition on its merits, and so did not
consider the solvency of the company or any of the particular facts in the case. He
then summarily denied the petition, finding only that the deposit of additional funds still
had not been made after a five month wait. Since the dismissal of the petition
occurred without allowing the insurance company the right of a hearing and a finding
of specific reasons, if any, as to why it might be required to make a local deposit of
cash with the Loudon County Court Clerk, this Court finds the denial of the petition to
be “without consideration and in disregard of the facts or circumstances of the case,”
and therefore arbitrary and capricious.
For this reason, the order of the trial court denying appellant’s petition to qualify
as a bail bondsman is hereby set aside, and this cause is remanded to the trial court
for a hearing on the merits of the petition. If the trial court, after a hearing, qualifies
appellant to underwrite bail bonds in Loudon County, it may require additional cash
deposits, deeds of trust, or any other liquid assets it deems proper to be held by the
Loudon County Court Clerk, upon a finding of specific reasons therefor. See, e.g.,
State v. AAA Aaron’s Action Agency, 1997 Tenn. Crim. App. LEXIS 956, C.C.A. NO.
01C01-9608-CR-00348, Davidson County (Tenn. Crim. App., filed September 30,
1997).
CHRIS CRAFT, SPECIAL JUDGE
6
CONCUR:
JERRY L. SMITH, JUDGE
JOE RILEY, JUDGE
7