Louisville Bd. of Ins. Agents v. Jefferson County Bd. of Ed.

• Decision Date: 18 October 1957
• Citation: 309 S.W.2d 40
• Parties: LOUISVILLE BOARD OF INSURANCE AGENTS, By E. Ewing Carrico, President, et al., Appellants, v. JEFFERSON COUNTY BOARD OF EDUCATION, Appellee.
• Court: United States State Supreme Court — District of Kentucky

Page 40

309 S.W.2d 40

LOUISVILLE BOARD OF INSURANCE AGENTS, By E. Ewing Carrico President, et al., Appellants, v. JEFFERSON COUNTY BOARD OF EDUCATION, Appellee.

Court of Appeals of Kentucky.

Oct. 18, 1957.

Rehearing Denied Feb. 7, 1958.

James W. Stites, Wallis Downing, Louisville, for appellants.

Lucian L. Johnson, Louisville, for appellee.

WADDILL, Commissioner.

The precise question on this appeal is whether a school board may insure its property with mutual insurance companies under nonassessable policies which provide that the insured becomes a 'member of the company, * * *, with power to vote * * *.' The circuit court held that the appellee, Jefferson County Board of Education, had statutory authority to purchase this type of insurance, and that the constitutional objections raised by the appellants, Louisville Board of Insurance Agents, were without merit.

Section 177 of the Constitution of Kentucky provides that the Commonwealth shall not become an owner or stockholder in any company, association, or corporation. Section 179 prohibits any county of subdivision thereof, city, town, or incorporated district from becoming a stockholder in any company, association, or corporation. And KRS 304.171(2) specifically authorizes school boards to purchase mutual insurance, and to become a 'member' of a mutual insurer.

Appellants contend that when appellee purchases a policy which makes the insured a 'member' of the mutual company, the appellee becomes a 'stockholder' in the company in violation of the constitutional prohibition. The crux of this argument is that the words 'member' and 'stockholder' are synonymous.

Since the case requires a construction of the constitution, we shall use an elementary aid of construction which requires the words used in the constitution be given their plain and ordinary meaning.

Webster's New International Dictionary defines 'stockholder' as 'one who is a holder or proprietor of stock or stocks,' while a 'member' is defined as 'an individual who belongs to an association.' Since appellee will not become an owner or holder of stock under the proposed insurance, it cannot be successfully asserted that because appellee becomes a 'member' of the company under the terms of his policy appellee therefore becomes a 'stockholder' in the company. Such an argument borders on sophistry.

We arrive at our interpretation of sections 177 and 179 not only by considering what we conceive to be the ordinary and commonly accepted meaning of the words used, but also by consideration of the objectives of the framers of the Constitution. These constitutional provisions were added to the fundamental law of the state to prevent the investment of public funds in private enterprises and to thereby forestall local and state tax revenues from being diverted from normal governmental channels. City of Louisville Municipal Housing Commission v. Public Housing Administration, Ky., 261 S.W.2d 286; Hager v. Kentucky Children's Home Society, 119 Ky. 235, 83 S.W. 605, 67 L.R.A. 815. This purpose will not be thwarted by the proposed action of the appellee.

Another valid...