Cunningham v. Republic Ins. Co., 1977-6631.

• Decision Date: 20 May 1936
• Docket Number: No. 1977-6631.,1977-6631.
• Citation: 94 S.W.2d 140
• Parties: CUNNINGHAM et al. v. REPUBLIC INS. CO. et al.
• Court: Texas Supreme Court

Page 140

94 S.W.2d 140

CUNNINGHAM et al. v. REPUBLIC INS. CO. et al.

No. 1977-6631.

Commission of Appeals of Texas, Section A.

May 20, 1936.

Error to Court of Civil Appeals of Eighth Supreme Judicial District.

Receivership suit against the Home Fire Insurance Company, in which A. P. Cunningham was appointed receiver and the American Surety Company was impleaded and, answering therein, interpleaded the Republic Insurance Company, the Fidelity Union Insurance Company, and others. Judgment denying the impleaded insurance companies' right to participate in the proceeds of a qualification bond filed by defendant with the surety company as surety was reversed by the Court of Civil Appeals [62 S.W.(2d) 339], and A. P. Cunningham brings error.

Judgment of Court of Civil Appeals reversed, and judgment of district court affirmed.

H. B. Sanders and Bartlett, Thornton & Montgomery, all of Dallas, for plaintiffs in error.

Smithdeal, Shook, Spence & Bowyer, of Dallas, Sleeper, Boynton & Kendall, of Waco, and Anderson, Orr & McCord, of Fort Worth, for defendants in error.

HICKMAN, Commissioner.

The Home Fire Insurance Company of Arkansas, now insolvent, formerly had a permit to do business in Texas, and, in accordance with articles 4925 and 4926 of the Revised Statutes, posted qualification bonds for the years 1928, 1929, and 1930, with the American Surety Company of New York as surety. In November, 1930, the company was adjudged to be an insolvent in the state of Arkansas and a general receiver thereof was appointed. Later, plaintiff in error A. P. Cunningham was appointed receiver in Texas by a district court of Dallas county in a suit styled L. P. Goodwyn v. Home Fire Insurance Company. By an amended petition in that cause the American Surety Company, as surety on the qualification bonds, was impleaded and, answering therein, admitted its liability on the bonds for the years 1928, 1929, and 1930, to the extent that it might be shown legally liable. It tendered into court money in payment of all claims construed by it as valid and enforceable against the proceeds of the bonds, impleaded various claimants under the bonds, and sought to have its liability thereunder determined and satisfied. Among those made parties were Republic Insurance Company, Fidelity Union Insurance Company, and certain compress companies, all corporations created under the laws of Texas.

In the trial court after all the parties defendant had answered the claims fell into three general classifications: (A) Those of policyholders in Texas who were resident citizens of Texas holding policies written in Texas by Texas agents of the insolvent company covering property situated in Texas; (B) those of Texas insurance corporations arising out of reinsurance contracts providing for the distribution of risks assumed by the respective insurance corporations upon policies written by them payable to citizens of various states upon property situated in various states; (C) those of certain compress companies incorporated under the laws of Texas arising out of policies written by the agent of the insolvent in Arkansas covering property situated in Texas. The claims falling under classification (A) were not resisted and are not in controversy. In the trial court the defendants whose claims fell under classifications (B) and (C) were denied the right to participate in the proceeds of the qualification bonds, but were awarded judgments against the insolvent company and its Texas receiver for the amounts of their respective claims, to be satisfied only out of the general assets of the insolvent in the hands of the receiver. The Court of Civil Appeals reversed the trial court's judgment and remanded the cause, with instructions to award all of the claimants their pro rata shares of the proceeds of the qualification bonds. 62 S.W.(2d) 339.

The case involves the construction of articles 4925 and 4926, R.S.1925, and related insurance statutes. Articles 4925 and 4926 read as follows:

Art. 4925. "Every fire insurance company, not organized under the laws of this State, applying for a certificate of authority to transact any kind of insurance in this State, shall, before obtaining such certificate, file with the Commissioner a bond, with good and sufficient surety or sureties, to be approved by and to be payable to the Commissioner and his successors in office, in a sum equal to twenty-five per cent of its premiums collected from citizens or upon property in this State during the preceding calendar year, as shown by its annual report for such year. The bond in no case shall be less than ten thousand nor more than fifty thousand dollars, conditioned that said company will pay all its lawful obligations to citizens of this State. Such bonds shall be subject to successive suits by citizens of this State so long as any part of the same shall not be exhausted, and the same shall be kept in force unimpaired until all claims of such citizens arising out of obligations of said company have been fully satisfied. Such bonds shall provide that in the event the company shall become insolvent or cease to transact business in this State at any time when it has outstanding policies of insurance in favor of citizens of this State, or upon property in this State, the Commissioner shall have power, after having given ten days notice to the officers of such company, or any receiver in charge of its property and affairs, to contract with any other insurance company transacting business in this State for the assumption and reinsurance by it of all the insurance risks outstanding in this State of such company which is insolvent, or which has ceased to transact business in this State, which contract shall also provide for the assumption by such reinsurance company of all outstanding and unsatisfied lawful claims then outstanding against such company which has become insolvent, or ceased to transact business in this State. In the event of the Commissioner making any such contract, and if the same shall be approved as reasonable by the Attorney General and the Governor of this State, the reinsuring company shall be entitled to recover from the makers of such bond the amount of the premium or compensation so agreed upon for such reinsurance. Any company desiring to do so may, at its option, in lieu of giving the bond required by this article, deposit securities of any kind in which it may lawfully invest its funds with the State Treasurer upon such terms and conditions as will in all respects afford the same protection and indemnity as herein provided for to be afforded by said bond."

Art. 4926. "Every fire insurance company, not organized under the laws of this State, hereafter issuing or causing or authorizing to be issued, any policy of insurance other than...