Lewis v. Independent School Dist. of City of Austin

• Decision Date: 25 March 1942
• Docket Number: No. 7847.,7847.
• Citation: 161 S.W.2d 450
• Parties: LEWIS v. INDEPENDENT SCHOOL DIST. OF CITY OF AUSTIN et al.
• Court: Texas Supreme Court

161 S.W.2d 450

LEWIS v. INDEPENDENT SCHOOL DIST. OF CITY OF AUSTIN et al.

No. 7847.

Supreme Court of Texas.

March 25, 1942.

Rehearing Denied May 6, 1942.

Writ of error from Court of Civil Appeals of Ninth Supreme Judicial District.

Action by C. H. Lewis against the Independent School District of the City of Austin, and others, for an injunction against the purchase by defendants of a policy of fire insurance from a certain insurer. From an adverse judgment, the plaintiff appeals to the Court of Civil Appeals. To review a judgment of the Court of Civil Appeals, 147 S.W.2d 298, affirming the judgment, the plaintiff brings error.

Judgments of the Trial Court and of the Court of Civil Appeals reversed, and cause remanded with instructions to grant the injunction.

Hardy Hollers, of Austin, for plaintiff in error.

Patterson & Patterson, J. M. Patterson, and White, Taylor & Gardner, all of Austin, for School Dist.

Nicholas S. Kiefer and Brown, Carlson, Kiefer & Kunke, all of Chicago, Ill., and

Black, Graves & Stayton and Ireland Graves, all of Austin, for Insurance Co.

SHARP, Justice.

This action was instituted by C. H. Lewis against the Independent School District of the City of Austin and others for an injunction against the purchase by the officials of the district of a policy of fire insurance from the Millers Mutual Fire Insurance Company of Texas, incorporated under the laws of Texas. On trial to the court upon an agreed statement of facts, the injunction was denied. The judgment of the trial court was affirmed by the Court of Civil Appeals. 147 S.W.2d 298. This Court granted a writ of error.

The Independent School District of the City of Austin will be referred to in this opinion as the School District, and the Millers Mutual Fire Insurance Company of Texas will be referred to as the Insurance Company.

The sole question here presented is whether the Legislature, by the enactment of Article 4860a—8, Vernon's Annotated Civil Statutes, could constitutionally authorize the School District, a political corporation, to purchase a policy of mutual insurance.

The following facts were agreed to by the parties to this suit: Plaintiff is a resident property-owning taxpayer within the School District; the Insurance Company is a mutual insurance corporation, which has no capital stock, its fund coming from the purchase of insurance by its members; the Insurance Company was incorporated under the laws of the State of Texas, and no question is raised as to its standing with the Insurance Commissioner of this State or as to its financial stability; because the Insurance Company has a surplus in excess of $100,000, the Board of Insurance Commissioners has recognized its right to issue, and the Insurance Company has proceeded to issue, nonassessable policies.

Article 4860a—1 et seq., Vernon's Annotated Civil Statutes, relate to mutual insurance companies, and prescribe the method of incorporation, the nature of the policies they may issue, and the details of the operation of such companies in this State.

Article 4860a—8 reads as follows: "Any public or private corporation, board or association in this State or elsewhere may make application, enter into agreements for and hold policies in any such mutual insurance company. Any officer, stockholder, trustee, or legal representative of any such corporation, board, association or estate may be recognized as acting for or on its behalf for the purpose of such membership, but shall not be personally liable upon such contract of insurance by reason of acting in such representative capacity. The right of any corporation organized under the laws of this State to participate as a member of any such mutual insurance company is hereby declared to be incidental to the purpose for which such corporation is organized and as much granted as the rights and powers expressly conferred."

Article 4860a—10 provides in part as follows: "Such a mutual company may issue a policy without a contingent premium while, but only while, it has a surplus equal to the capital required of a domestic stock insurance company transacting the same kinds of insurance * * *. If at any time the admitted assets are less than the unearned premium reserve, other liabilities and the required surplus, the company shall immediately collect upon policies with a contingent premium a sufficient proportionate part thereof to restore such assets * * *." (Italics ours.)

Acting through its Board of Trustees, the School District proposed to buy, and the Insurance Company agreed to sell to the School District, a nonassessable policy of fire insurance, to cover certain school property within the district, at a price within the premium rates fixed for fire insurance rates generally by the Board of Insurance Commissioners. The policy has been delivered, but no payment has been made therefor. It is agreed that the Board of Trustees will pay the premium for such insurance, unless restrained by court order.

The by-laws of the Insurance Company, which are referred to and made a part of the policy of insurance, provide in part as follows:

"Sec. 2. The Object of the Company is to transact the business of insurance as authorized under the charter of the Company and the laws of the State.

"Sec 3. Who Are Members. Each person, firm or corporation having a policy in the Company shall be a member thereof during the life of his policy, and no longer. (Italics ours.)

"Sec. 4. Each policyholder shall be entitled to one vote, to be cast in person or by proxy executed and filed with the Secretary of the Company not less than one week prior to the meeting at which such proxy is used. (Italics ours.)

* * * * *

"Sec. 6. The Annual Meeting of the members shall be held at the Company's office in the City of Fort Worth on the third Tuesday in January of each year, for the transaction of general business of the Company and...