Hand v. State ex rel. Yelkin

• Decision Date: 14 April 1960
• Docket Number: No. 13637,13637
• Citation: 335 S.W.2d 410
• Parties: Thomas E. HAND, Jr., et Appellants, v. STATE of Texas ex rel. Raymond T. YELKIN et al., Appellees.
• Court: Texas Court of Appeals

Page 410

335 S.W.2d 410

Thomas E. HAND, Jr., et Appellants, v. STATE of Texas ex rel. Raymond T. YELKIN et al., Appellees.

No. 13637.

Court of Civil Appeals of Texas, Houston.

April 14, 1960.

Rehearing Denied May 5, 1960.

Bell & Singleton, Charles W. Bell, John V. Singleton, Jr., Butler, Binion, Rice & Cook, Jack Binion, Quinnan H. Hodges, Fletcher H. Etheridge, Houston, Hart & Hart, James P. Hart, Austin, on motion for rehearing, for appellant.

Joseph G. Resweber, County Atty., Barrow, Bland & Rehmet, David Bland, Houston, M. K. Woodward, Graves, Dougherty & Gee, Robert J. Hearon, Jr., J. Chrys Dougherty, Austin, for appellee.

WERLEIN, Justice.

This is an appeal from an order of the District Court of Harris County granting a temporary injunction ancillary to a pending quo warranto suit to determine relators' (appellees') title to the offices of directors of Columbia General Life Insurance Company. Prior to the filing of appellees' first and second supplemental petitions praying for an injunction, the trial court sustained appellants' plea to the jurisdiction and motion to dismiss filed in the main suit. The trial court's judgment was reversed and the case remanded. See State ex rel. Yelkin v. Hand, Tex.Civ.App., 331 S.W.2d 789, writ ref. n. r. e., hereinafter referred to as State v. Hand.

While the former appeal was pending, the relators filed in this Court a motion for leave to file an original application for injunction, which motion was denied on the ground of want of jurisdiction. Thereafter on January 23, 1960, appellees herein sought in the Supreme Court a writ of mandamus directing this Court to take jurisdiction and then to act in its discretion on the injunction application. The Supreme Court denied the relief sought. We do not think the action of either court in such connection is of any significance insofar as this appeal is concerned.

While the case was pending in the Supreme Court on applications for writs of error, appellees sought and the Supreme Court granted a temporary injunction against appellants restraining them from holding any election of corporate officers or directors of Columbia General Life Insurance Company, pending a final determination of such applications. Thereafter, on March 4, 1960, the Supreme Court, 333 S.W.2d 109, denied both appellant's and appellees' applications for writs of error in said cause, finding no reversible error in the action of this Court on the plea to the jurisdiction and motion to dismiss, and in the same order used this significant language:

'In view of the emergency circumstances disclosed by the record, no motions for rehearing will be entertained. The trial court may take such action in the premises to protect the rights of all parties as it may deem advisable. The temporary stay order heretofore issued by us is dissolved.'

Pending said proceedings in the Supreme Court, other stockholders of the company, not parties to the quo warranto proceedings, filed an application with the Commissioner of Insurance for the purpose of enjoining the election of directors and officers on March 8, 1960, which was the second Tuesday in March, the statutory date for such election. The Commissioner held he was without authority to grant the relief sought, and his ruling was affirmed on appeal by the State Board of Insurance. No appeal was taken from such order of the State Board.

After the action of the Supreme Court on March 4, 1960, appellees, the next day, filed their second supplemental petition in the trial court asking for a temporary restraining order pending hearing on their first and second supplemental petitions, and praying that upon hearing a temporary injunction be issued enjoining appellants from holding or causing to be held any election of corporate directors of said company. The court granted a temporary restraining order and upon hearing granted the temporary injunction, from which this appeal is taken.

Appellants assert that the trial court had no jurisdiction to enjoin the election of directors of said company for the reason that the power to do so is exclusively within the primary jurisdiction of the Commissioner of Insurance and the State Board of Insurance, and because Article 3.63 of the Insurance Code of the State of Texas prohibits any person other than the State Board of Insurance from bringing or maintaining any action for the enjoining, restraining or interfering with the prosecution of the business of an insurance company. They cite Article 1.10 of the Insurance Code, V.A.T.S., defining the duties of the State Board of Insurance and providing among other duties that it '1. Shall Execute the Laws.--See that all laws respecting insurance and insurance companies are faithfully executed.'

They also rely on Article 1.09(a) providing that the Commissioner of Insurance shall be charged with the primary responsibility of administering and enforcing and carrying out the provisions of the Insurance Code under the supervision of the Board; and on Section 4, Article 3.04, providing:

'* * * The board of directors so elected shall serve until the second Tuesday in March thereafter, on which date, annually thereafter, there shall be held a meeting of the stockholders at the home office, and a board of directors elected for the ensuing year.'

They base their contention also upon Article 3.63 of the Code, which provides:

'* * * No action shall be brought or maintained by any person other than the Board of Insurance Commissioners for the enjoining, restraining or interfering with the prosecution of the business of the company.'

In State v. Hand, supra, this Court held that there was a distinction between election contests and proceedings brought by private individuals to remove officers or directors because of want of competence, fitness, reputation or because of malfeasance in office, and that where the action was brought merely to determine the title to the office of director, where such determination depended solely upon the validity of the election, the Commissioner of Insurance and State Board of Insurance did not have primary jurisdiction but that a quo warranto suit was the proper proceeding. It also held that the prosecution of the quo warranto suit did not interfere with the prosecution of the business of the company.

Appellants rely on Kavanaugh v. Underwriters Life Insurance Co., Tex.Civ.App., 231 S.W.2d 753, writ ref. In the opinion of this Court in State v. Hand, supra, the Kavanaugh case was distinguished. We think the distinction is also applicable in this appeal from the court's judgment granting the temporary injunction. State v. Hand was not brought to remove directors because of mismangement or wrongdoing but to remove them because they were not properly elected, and hence not directors at all. The Commissioner of Insurance and Board of Insurance have broad powers in administrative matters pertaining to insurance companies. However, in a case involving title to office of a director, as heretofore stated, action may be brought initially in the court. The ancillary injunction granted is merely an incident to the main suit. Its purpose is to maintain the status quo until the principal suit can be tried on its merits.

At the time the Supreme Court granted the temporary injunction restraining appellants from holding any election of corporate officers and directors of the company, pending a final determination of said applications for writs of error, it had before it the opinion of this Court in State v. Hand, and must necessarily have known that there was a question as to whether or not primary jurisdiction was in the Commissioner of Insurance and State Board of Insurance as asserted by appellants. If it was not additionally informed of that fact by appellees' application for temporary injunction filed in the Supreme Court, it was unquestionably so advised by appellants' motion to dissolve the injunction it had granted. It did not dissolve the injunction or stay-order, however, until it had acted upon said applications for writs of error. In its order refusing, no reversible error, both appellants' and appellees' applications, the Supreme Court, being fully advised as aforesaid, stated that the trial court could take such action in the premises to protect the rights of all parties as it may deem advisable. From the Supreme Court's action in granting the temporary injunction and in keeping it in force until it had passed upon both applications for writs of error, we must necessarily conclude that the Court was of the opinion that an injunction was an appropriate remedy to protect its jurisdiction while the applications for writs were there pending, even though such injunction might result in postponing the stockholders' annual meeting and election of directors beyond the second Tuesday in March, the date designated therefor in the Insurance Code and also in the Company's by-laws.

We think that the Supreme Court's order, in view of it having granted an injunction staying the election, strongly sanctions the appropriateness of the trial court's action in granting the temporary injunction under the facts of this case. Indeed, it seems clear that both the Supreme Court and the District Court have the power and jurisdiction to grant relief by ancillary injunction when necessary to preserve the status quo between the parties pending their respective actions. The District Court, being a court of general jurisdiction, has broader powers than the appellate courts to grant extraordinary relief.

We do not think Article 3.63 of the Insurance Code providing that no action shall be brought or maintained by any person other than the Board of Insurance Commissioners for the enjoining, restraining or interfering with the prosecution of the business of the company is applicable to this appeal. Neither the principal suit nor the ancillary injunction was brought for the purpose of enjoining, restraining or interfering with the...