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FIRST NATIONAL BANK MARYLAND v. COMMONWEALTH PENNSYLVANIA INSURANCE DEPARTMENT ET AL. (12/02/86)

decided: December 2, 1986.

THE FIRST NATIONAL BANK OF MARYLAND, PETITIONER
v.
COMMONWEALTH OF PENNSYLVANIA INSURANCE DEPARTMENT ET AL., RESPONDENTS



Original Jurisdiction in case of The First National Bank of Maryland v. Commonwealth of Pennsylvania, Insurance Department et al.

COUNSEL

Warren L. Dennis, with him, William A. Slaughter and Christopher Wolf, for petitioner.

George F. Grode, with him, Janice L. Anderson, for respondent, Commonwealth of Pennsylvania, Insurance Department.

Thomas A. Allen, White and Williams, for respondent, U.S. Mortgage Company.

President Judge Crumlish, Jr. Opinion by President Judge Crumlish, Jr.

Author: Crumlish

[ 102 Pa. Commw. Page 475]

The First National Bank of Maryland (FNB) has filed a petition for review and motion for writ of peremptory mandamus*fn1 to compel the Commonwealth Insurance Commissioner*fn2 George F. Grode to issue a summary order (1) suspending the business of U.S. Mortgage Insurance Company (U.S. Mortgage), (2) taking possession of its assets, and (3) halting the payment of claims.

FNB, acting as a trustee for a number of financial institutions, purchased mortgage-backed securities ("Mortgage Pass-Through" Certificates) issued by EPIC

[ 102 Pa. Commw. Page 476]

Mortgage, Inc. (EPIC). The securities covered properties owned by numerous groups, of which the Equity Program Investment Corporation was a general partner. Each of the notes was backed by property and mortgage guaranty insurance up to twenty-five percent of the outstanding principal and interest. U.S. Mortgage is one of eight insurance companies backing the notes.

In August 1985, EPIC defaulted on all of its payments. FNB and other noteholders brought an action in the U.S. Eastern District Court of Virginia seeking to recover the guaranty insurance from U.S. Mortgage and the other guarantors. U.S. Mortgage is defending its interest in this suit on the ground of EPIC's fraudulent misrepresentation in obtaining insurance.

FNB contends that the Commissioner has a mandatory duty under Section 510(a) of the Act of May 17, 1921, P.L. 789, as amended (Act), to issue an order suspending an insurer's business when he has reason to believe that irreparable harm may come to the insurer's policyholders because of insolvency or financial instability. FNB contends further that U.S. Mortgage is insolvent as defined in the Act.*fn3

FNB seeks relief in the nature of mandamus. Mandamus will only lie to compel official performance of a ministerial act or mandatory duty where there is a clear legal right in the plaintiff, a corresponding duty in the defendant, and a lack of any other adequate remedy at law. Delaware River Port Authority v. Thornburgh, 508 Pa. 11, 493 A.2d 1351 (1985). While mandamus will not ...


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