Fuller v. Lockhart

• Decision Date: 11 December 1935
• Docket Number: 466.
• Citation: Fuller v. Lockhart, 209 N.C. 61, 182 S.E. 733 (N.C. 1935)
• Parties: FULLER v. LOCKHART, Superintendent of Public Instruction, et al.
• Court: North Carolina Supreme Court

182 S.E. 733

209 N.C. 61

FULLER v. LOCKHART, Superintendent of Public Instruction, et al.

No. 466.

Supreme Court of North Carolina

December 11, 1935

Appeal from Superior Court, Wake County; Parker, Judge.

Action by James W. Fuller, on behalf of himself and all other taxpayers of Wake County who desire to make themselves parties, against John C. Lockhart, Superintendent of Public Instruction for the County of Wake, and others. From an adverse judgment, plaintiff appeals.

Affirmed.

This was a civil action instituted on behalf of the plaintiff and all other taxpayers of Wake county who desire to make themselves parties, against the county board of education of Wake county and the three mutual fire insurance companies above set forth, named as defendants.

The plaintiff in his complaint, among other things, alleges: That the county board of education of the county of Wake, by unanimous vote, adopted a resolution authorizing the superintendent of public instruction of said county to insure against loss by fire certain school buildings located in Wake county, under the jurisdiction of said board, and in pursuance of said resolution that the superintendent of public instruction applied for a fire insurance policy insuring the Green Hope High School against loss by fire to be issued by defendant fire insurance companies. That the said three insurance companies delivered a single policy to the county board of education of Wake county, as is set forth in the record, in the amount of $2,000, limiting the liability of each to one-third of any loss sustained not exceeding the amount of the policy, for a period of one year reciting a consideration of $12.35 premium and a contingent liability against said county board of education to an assessment in an equal additional amount.

The plaintiff further alleged that unless restrained the county board of education would accept said policy of insurance and pay the cash premium and assume said contingent liability for assessment for equal and additional amounts to the great and irreparable damage and injury of plaintiff and other taxpayers in said county.

The plaintiff further alleges: "The acceptance of said fire insurance policy and payment of said cash premium will and does constitute said defendant county board of education of the county of Wake a member of each of said defendant mutual insurance companies; and in accepting said insurance and becoming members of said defendant insurance companies, said county board of education of the county of Wake does and will: (1) Assume an unlimited liability to assessment to pay losses and expenses of the companies, notwithstanding any limitation of this liability recited in the policy, and assumption of such liability by the county board of education of the county of Wake would be wholly ultra vires and contrary to law; (2) undertake to pay for the insurance coverage obtained an indeterminate price which would be left to the arbitrary determination of the companies, contrary to the laws of the state relating to school districts and other public corporations; (3) assume or underwrite the obligations of private individuals and corporations, contrary to the Constitution and laws of the state; (4) undertake to raise money by taxation for private purposes, contrary to the Constitution and laws of the state; (5) lend its credit to a private corporation, contrary to the Constitution of the state; (6) become a stockholder in a private corporation contrary to the Constitution of the state; (7) engage in the business of fire insurance, and in so doing would be acting ultra vires and contrary to the law of the state relating to public corporations and insurance companies. (8) Associate itself as a partner in the conduct of a private business in which it has no authority or power to engage, and in so doing would be acting ultra vires and contrary to the Constitution and laws of the state."

And the plaintiff prayed that the county board of education of Wake county be enjoined and restrained from accepting the policy of insurance or any other policy of insurance issued by any mutual fire insurance company, and from paying, or undertaking to pay, the premiums under any policy of insurance issued by said defendant insurance companies or doing any act or assuming any liability to give effect to such fire insurance policies, and that the insurance company its officers and agents, be forever enjoined and restrained from accepting any payment of premiums under said contract of insurance or asserting any liability or obligation against or on the part of said county board of education, or by virtue of said policies or contract of insurance, or asserting the membership of said defendant, county board of education, in any of said defendant fire insurance companies or doing any act or thing to give effect to such policy or contract of insurance.

In answer the defendants, and each of them, "admit that all of the losses and expenses of the defendant companies are and must be paid out of moneys derived ultimately from the amounts collected from their member policyholders past, present and future; but further say that a large part of the moneys available for the payment of such losses and expenses are derived directly from the income from the investment of a portion of the premiums collected from their members and accumulated as reserves, guaranty funds and surplus, the principal of which funds, now aggregating a large amount in the case of each of the defendant companies, as well as the income therefrom are at all times available, if needed, for the payment of losses and expenses of the said companies. They admit that the county board of education of Wake county, and its officers intend to accept said policy of insurance and pay the cash premium of $12.35 and assume a contingent liability to assessment for an equal and additional amount, but it is denied that such action on their part will result in the damage or injury of plaintiff or of any other taxpayer of the county of Wake. * * * They admit that the acceptance of said fire insurance policy and the payment of the cash premium will and does make the county board of education of the county of Wake a member of each of said defendant mutual fire insurance companies, but not a stockholder or partner in or with any of them. * * * Further answering the defendants, and each of them, assert that the present condition and record of all and each of said defendant companies justify the trustees and officers of the defendant and school district, in the exercise of a sound administrative discretion, in applying for and accepting the policy or policies of which complaint is made in said petition, and thereby obtaining for said school district a large saving in its insurance expense as to the property covered by said policy or policies, and undertaking as consideration for such indicated savings the possible payment under certain extraordinary conditions of the further premium in the form of assessment which can, under no condition, exceed the amount of the cash premium."

The judgment of the court below is as follows: "This cause coming on to be heard before his honor, R. Hunt Parker, Judge, and being heard upon the restraining order heretofore made by his honor, Clawson L. Williams, enjoining the defendants herein from making any payment of the premiums under the policy of insurance set forth in the complaint or asserting any liability or obligation against or on the part of the county board of education of the county of Wake under and by virtue of said policy or contract of insurance, or asserting the membership of said county board of education of Wake county in any and all of said defendant fire insurance companies or doing any act or thing to give effect to said policy or contract of insurance and from the payment of the premium alleged to be due thereon, and after argument by counsel representing the plaintiff and the defendants, the court being of the opinion that said temporary restraining order should be vacated, it is accordingly ordered and adjudged: That the temporary restraining order heretofore issued in the above-entitled cause be and the same is hereby set aside and vacated; that the defendants go hence without day and recover their costs of the plaintiff. R. Hunt Parker, Judge Presiding over Courts of the Seventh Judicial District."

The plaintiff excepted, assigned error to the judgment as signed, and appealed to the Supreme Court.

Manning & Manning and Jones & Brassfield, all of Raleigh, for appellant.

John W. Hinsdale, of Raleigh, and Eugene Quay, of Chicago, Ill., for appellees.

CLARKSON Justice.

The many objections made by plaintiff to the contract made between the county board of education of Wake county, N. C., and the three defendants, mutual fire insurance corporations, cannot be sustained.

The county board of education of Wake county insured in these corporations a two-story brick building, known as Green Hope School, in White Oak township in said county. The amount of insurance was $2,000, and for one year from April 1, 1935, to April 1, 1936. The language of the policy applicable to the controversy: "In Consideration of the Stipulations herein named and of Twelve and 35/100 Dollars Premium do insure Board of Education of Wake County, etc. * * * This policy is issued on a mutual basis for cash premium with a contingent liability in an amount as set forth in the by-laws of the respective companies on page three hereof, and by the acceptance of this policy, the policy-holder becomes a member of each of said companies, subject to the provisions of the by-laws thereof for all purposes. In determining the contingent liability of a policy-holder in each company, the total premium of this...