National Bankers Life Insurance Co. v. Rosson, 16657

• Decision Date: 04 February 1966
• Docket Number: No. 16657,16657
• Citation: 400 S.W.2d 366
• Parties: NATIONAL BANKERS LIFE INSURANCE COMPANY, Appellant, v. Frank M. ROSSON et al., Appellees. . Dallas
• Court: Texas Court of Appeals

Page 366

400 S.W.2d 366

NATIONAL BANKERS LIFE INSURANCE COMPANY, Appellant, v.Frank M. ROSSON et al., Appellees.

No. 16657.

Court of Civil Appeals of Texas Dallas.

Feb. 4, 1966.

Rehearing Denied March 11, 1966.

John A. Pace, Roy R. Ray and Daniel T. Collins, Dallas, for appellant.

Johnson, Guthrie, White & Stanfield, Curtis White and R. L. Dillard, Jr., Dallas, Frank M. Rosson and Floyd McGown, Jr., San Antonio, for appellees.

WILLIAMS, Justice.

This suit was originally filed on July 11, 1958 in the District Court of Kendall County, Texas, by Vernon T. Adler, individually, and as Executor of the Estate of H. O. Adler, Deceased, and Dorothy Virginia Helm and husband, Floyd H. Helm, Jr., as plaintiffs, against Pierce P. Brooks and National Bankers Life Insurance Company, as defendants.The suit was in the nature of a stockholders' derivative class action authorized by Rule 42,Texas Rules of Civil Procedure.Plaintiffs, as minority stockholders of National Bankers Life Insurance Company brought the action for the benefit of the company and on behalf of all its minority stockholders.Plaintiffs' petition contained itemized violations by Pierce P. Brooks against the company and claim was made against Brooks for the sum of $3,000,000.Brooks was a majority stockholder of the company and an officer and director of the company at the time the suit was filed.

After an appeal on venue ¹the case was transferred to Dallas County for trial.On December 2, 1962 the 116th District Court of Dallas County entered a summary judgment in favor of National Bankers and denying plaintiffs any relief.On appeal, the case was transferred to the Tyler Court of Civil Appeals, which reversed and remanded ²the case to the trial court for a determination of fact issues.Following remand, the case was transferred to the 101st District Court and tried to a jury.In response to two special issues the jury found (1) that plaintiffs' suit aided National Bankers Life Insurance Company in the recovery of $1,025,000 from Pierce P. Brooks, and (2) that the sum of $200,000 would reasonably compensate Rosson and McGown for their services as lawyers in this suit.

OPINION

Appellant presents three points of error in its assault upon the judgment of the trial court: (1) that the trial court erred in excluding certain testimony of a witness E. M. Arnold; (2) that the trial court erred in refusing to reduce the amount of the jury verdict which was excessive as a matter of law, and not supported by the evidence; and (3) that the trial court erred in refusing to grant appellant's motion for judgment Non obstante veredicto for the reason that the district court never acquired jurisdiction of this stockholders' derivative suit.We have elected to consider these three points in inverse order.

A consideration and determination of appellant's jurisdictional point must be viewed in the light of antecedent facts.On July 1, 1958, some ten days prior to the filing of this suit, the Commissioner of Insurance of the State of Texas filed a Show Cause Order against National Bankers Life Insurance Company and its officers in which allegation was made of many acts of omission and commission constituting mismanagement by the officers of the company, and being many of the same acts later set out in the petition of the minority stockholders.The Show Cause Order fixed a date for the company to appear and show cause why its charter to do business in Texas should not be cancelled.On July 24, 1958, the Insurance Commissioner entered an order finding, in effect, that in spite of mismanagement the company remained solvent and approved the continuation of its certificate of authority to do business in this state.By his order the Commissioner directed the new board of directors and officers of National Bankers Life Insurance Company to immediately take such steps as might be necessary to investigate thoroughly the matters complained about and to take any action indicated to be proper and necessary to recover on behalf of National Bankers any expenditure of funds which was made for illegal or unauthorized investments, etc.Pierce P. Brooks sold his majority stock in the National Bankers Life to R. L. Huffines, Jr. and Victor Muscat, by contract dated August 11, 1958.Subsequently, most of the directors who were favorable to Brooks, or controlled by him, resigned and a new board of directors and new officers were elected, including Huffines as President and Muscat as Chairman of the Board of Directors.The new management took over National Bankers Life Insurance Company and on December 17, 1958, while plaintiffs' lawsuit was pending, the new management of the company, Huffines and Muscat, entered into a written contract of settlement with Pierce P. Brooks in New Orleans, Louisiana.This settlement agreement called for Brooks to pay $1,025,000 to the company.

Appellant's contention that the trial court never obtained jurisdiction of the subject matter of this litigation is based upon the doctrine of primary jurisdiction.Appellant invokes the provisions of Art. 1.19 of the Insurance Code, Sec. 3, Vernon's Ann.Tex.Civ.Statutes, which provides, Inter alia: 'No action shall be brought or maintained by any person other than the Board for closing up the affairs or to enjoin, restrain or interfere with the prosecution of the business of any such insurance company organized under the laws of this State.'

Appellant argues that by virtue of this statute, and the Commissioner of Insurance having obtained original jurisdiction of the 'affairs and condition' of the insurance company that the court had no right or authority to consider the case.It invokes the application of the doctrine of primary jurisdiction which is fully discussed in 1 Tex.Jur.2d, p. 661.See also28 Texas LawRev., pp. 400, 402;42 Am.Jur., pp. 698--699; Kavanaugh v. Underwriters Life Ins. Co., Tex.Civ.App., wr. ref., 231 S.W.2d 753;Huffines et al. v. Mercury Life & Health Co. et al., Tex.Civ.App., 185 S.W.2d 239;Texas & Pacific Ry. Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 27 S.Ct. 350, 51 L.Ed. 553.

While we fully recognize and appreciate the extent and effect of the doctrine of primary jurisdiction as it relates between administrative boards and the courts, we find ourselves unable to agree with appellant that the Commissioner of Insurance of Texas obtained such primary jurisdiction of the subject matter of the litigation as to deprive the trial court of jurisdiction thereof.We think that the decision of the Tyler Court of Civil Appeals in Adler v. Brooks, 375 S.W.2d 544, wr. ref. n.r.e., is determinative of the question.There, the Court of Civil Appeals carefully considered the identical jurisdictional attack now being made here and held that the relief sought by plaintiffs in their stockholders derivative action does not infringe upon any duty of the insurance company governed by the Insurance Board or its officers but seeks to recover from fraudulent officers, for the benefit of the company, money which the Insurance Commissioner was not authorized to sue for and at the time that suit was brought there were no officers of the company to whom the stockholders could turn to prevent this great loss to them.The court held that plaintiffs were not barred from the prosecution of their suit by the filing of the Show Cause Order by the Insurance Commissioner for the reason that the Insurance Commissioner did not have the power to secure the relief sought in their suit.

We are in complete agreement with the opinion of the Court of Civil Appeals at Tyler and overrule appellant's third point of error .

Appellant utilizes the greater part of its brief by attacking the excessiveness of the verdict and judgment.It prays that we require a remittitur so as to reduce the judgment or that we reverse and remand the judgment for further consideration on the question of reasonableness of the attorneys' fees sought by appellees.It is significant to note that appellant does not challenge the jury finding that appellees' suit aided National Bankers in the recovery of the $1,025,000.Appellant does not question appellees' right to recover attorneys' fees under the facts here presented but only assails the amount of recovery.The Court of Civil Appeals at Tyler in its opinion in Adler v. Brooks, 375 S.W.2d 544, correctly stated the law as to the right to recover attorney's fees and expenses in stockholders derivative actions, as follows:

'We think the rule in Texas covering the right of a minority stockholder suit under Rule 42 authorizes recovery of expenses and attorney's fees to the extent that the suit aided the company in its recovery of the $1,025,000.00 which it recovered from Brooks.Modern Optics, Inc., Appellant, v. Jesse Buck, Appellee, and authorities therein cited.Tex.Civ.App., 336 S.W.2d 857.The letters, depositions, and statements in this record certainly make an issue of fact for the trial court as to the extent, if any, such suit aided the company in its recovery.'

The question of excessiveness of the verdict and the judgment rendered thereon naturally requires an exhaustive review of the testimony material to the issue.We have carefully read the entire statement of facts and find that it presents the usual and characteristic testimony in cases of this kind.There is evidence presented by both appellant and appellees to...