Gray v. Moore

• Decision Date: 24 May 1943
• Docket Number: No. 5544.,5544.
• Citation: 172 S.W.2d 746
• Parties: GRAY et al. v. MOORE.
• Court: Texas Court of Appeals

Page 746

172 S.W.2d 746

GRAY et al. v. MOORE.

No. 5544.

Court of Civil Appeals of Texas. Amarillo.

May 24, 1943.

Rehearing Denied June 28, 1943.

Appeal from District Court, Travis County; Roy C. Archer, Judge.

Suit by Herbert S. Gray and others, on behalf of themselves and as class representatives of all other subscribers and policyholders at Casualty Underwriters during the period from January 1, 1937, to August 11, 1938, inclusive, against Austin Moore, as receiver of Casualty Underwriters and of Underwriters Agency, its attorney-in-fact, to set aside and vacate a judgment in a cause styled Austin Moore, Receiver against First State Bank & Trust Company and others. Defendant pleaded a cross-action which was severed from plaintiffs' cause of action. Plaintiffs Frank Graves, Inc., Chamberlain and Strain, a partnership, and G. B. Mitchell, upon oral motion were dismissed from the suit, individually, and as class subscribers. From an adverse judgment, plaintiffs appealed to the Court of Civil Appeals for the Third Supreme Judicial District at Austin and the cause was transferred by the Supreme Court to the Court of Civil Appeals for the Seventh Supreme Judicial District at Amarillo.

Affirmed.

Milburn E. Nutt, of Wichita Falls (G. E. Price, of Lincoln, Neb., of counsel), for appellants.

William M. Brown, of Fort Worth, Saner, Saner & Jack, of Dallas, and Jimmie Cunningham, of Lubbock, amici curiae.

Marion B. Solomon, of Dallas (Willis E. Gresham, of Austin, of counsel), for appellee.

PITTS, Chief Justice.

Appellants, Herbert S. Gray, Henry Cobb and Milton Katz, of Wichita County, Texas, filed this suit in the 126th District Court of Travis County on May 11, 1942, on behalf of themselves and as class representatives of all other subscribers and policyholders at Casualty Underwriters during the period of time from January 1, 1937, to August 11, 1938, inclusive, there being 6,508 such subscribers and policyholders in all, against Austin Moore, receiver of Casualty Underwriters and of Underwriters Agency, its attorney-in-fact, the same being in the nature of a bill of review to set aside and vacate a judgment previously rendered by the same court on April 22, 1941, in cause No. 64395 styled Austin Moore, Receiver vs. First State Bank and Trust Company et al. Appellants filed this as a class suit and alleged that all party plaintiffs stand in the same relationship to Casualty Underwriters, the attorney-in-fact and the receiver, and that they are so numerous it would be impracticable and impossible to make them all parties by name; that those not named are represented by the three appellants named above; that the named appellants are similarly situated to a representative class of all subscribers and policyholders of Casualty Underwriters for said period of time; that the relief prayed for and sought applies to all subscribers and policyholders, individually, and as a class; that Austin Moore was appointed as receiver of Casualty Underwriters and of its attorney-in-fact, Underwriters Agency, by the trial court in cause No. 60393, styled State of Texas vs. Casualty Underwriters and Underwriters Agency, Its Attorney-in-fact, on August 11, 1938, and in due time qualified as such and has been so acting; that Casualty Underwriters was organized in 1933 as a reciprocal insurance exchange by virtue of Chapter 20, Title 78, Revised Civil Statutes of 1925, but that its business was usually managed and conducted by and through its attorney-in-fact, Underwriters Agency, a corporation; that Austin Moore, receiver, and appellee, had obtained judgment in said cause No. 64395 for $416,686.64 against the 6,508 subscribers and policyholders of the Casualty Underwriters as class defendants in said suit; that said judgment so obtained is void or, at least, voidable and should be set aside for the reason that the named defendants in said cause No. 64395 were not a truly representative number and were not properly and truly class representatives of all the subscribers and policyholders and did not fairly, truly and adequately represent them; that they were not similarly situated as other subscribers; that said receiver purposely omitted these named appellants and others similarly situated for the purpose of stifling any real defense to said suit and that he did stifle, forestall and circumvent any real defense to said suit; that the said receiver did not act fairly and in good faith in the selection of subscribers to represent the class as defendants; "that said receiver's conduct was such as to lull these plaintiffs into a false sense of security, and they were induced to relax that watchfulness in regard to their interest, which otherwise they would have exerted", hence, they were "not lax or negligent in failing to intervene and present their defenses upon the trial of said cause, nor were they negligent in failing to discover the pendency of said suit, nor the fact of the rendition of said judgment in time to present their motion for a new trial of said cause. That said judgment has now become final, thirty days having elapsed since rendition and entry thereof on April 22, 1941, no appeal having been taken therefrom"; that appellants had and do have good and sufficient defenses and would have presented same if they could have had an oportunity to do so in said cause No. 64395; that there was no contingent liability imposed upon them during said period of time or any part thereof and that they were not liable for any sum; that the time has elapsed for appellants to avail themselves of any other remedy and they prayed for judgment accordingly.

Appellee answered with numerous exceptions challenging the sufficiency of appellants' pleadings, a general denial and a denial that appellants have the right to bring the suit as representatives of the class described; that appellants were parties, many of them having intervened, in cause No. 60393 wherein the Casualty Underwriters were declared insolvent or in serious danger of insolvency and Austin Moore was appointed receiver and that they were therefore charged with knowledge of the proceedings in cause No. 60393 as well as cause No. 64395; that actual notice was given immediately by the receiver to all subscribers and policyholders advising them of his appointment and of the cancellation of their policies and termination of their insurance and furnishing them blanks for filing any claims they may have; that on December 20, 1940, the trial court in said cause No. 60393 directed the receiver to institute cause No. 64395 to remove the existing deficit and that all appellants had actual as well as constructive knowledge of all proceedings, including the suit in cause No. 64395; that by the exercise of ordinary care they should have known of said order and proceedings and that they were charged with the duty of apprizing themselves of such proceedings had in cause No. 60393 and cause No. 64395; that 2,356 claims had already been allowed against the receivership and over 2,000 of the policyholders of Casualty Underwriters had already accepted the benefits of the orders and judgments of the court in causes Nos. 60393 and 64395; that thousands of the subscribers whom appellants claimed to represent have already satisfied the judgment against them, their moneys have been disbursed and they have been released from the terms of the judgment; that equities have intervened and the condition of parties have changed so that it would be impossible to restore the parties to their former status. Appellee pleads the judgment rendered in cause No. 64395 and prays that appellants take nothing as against the receiver. The appellee also pleads a cross-action but same was severed from appellants' cause of action by order of the trial court, passed for further consideration and is not considered on this appeal.

Appellants filed a supplemental petition excepting to appellee's answer and denying his allegations; that they had no actual notice or knowledge of cause No. 64395 until six months after the rendering of the judgment therein and until it was too late to appeal; that they were not guilty of negligence and endeavored, by the filing of a trial amendment, to meet and cure some of the exceptions levelled at their original petition by appellee, to all of which appellee levelled numerous additional exceptions and a general denial.

On June 20, 1942, the case was called for trial and appellee's counsel asked that his exceptions be passed upon by the trial court and appellants' counsel requested that the court hear the testimony and pass upon the exceptions and the issues on the merits at one time, assuring the trial court that he would stand upon his pleadings as they were and would not ask leave to amend his pleadings if appellee's exceptions were sustained. The case then proceeded to trial before the court without a jury.

The record discloses that the trial court appointed Austin Moore receiver of Casualty Underwriters and Underwriters Agency on August 11, 1938, in cause No. 60393; that Willis E. Gresham of Travis County was appointed by the court in said cause on said date as attorney for receiver and that H. J. Yarborough of Dallas County was appointed by the court in said cause on said date as Master in Chancery to hear any claims filed; that said receiver qualified immediately and sent notices to all policyholders of Casualty Underwriters on August 17, 1938, advising them of his appointment and that the Board of Insurance Commissioners had cancelled the license of Casualty Underwriters and Underwriters Agency; that said concerns were no longer doing business and that their insurance previously issued was cancelled; that on August 25, 1938, the receiver sent notices to all creditors and claimants having claims against Casualty Underwriters and Underwriters Agency, advising them of his appointment and the appointment of a master in chancery; that on December 20, 1940, the trial court in cause ...