Phillips v. Daniel

• Decision Date: 06 May 1936
• Docket Number: No. 8479.,8479.
• Citation: 94 S.W.2d 1193
• Parties: PHILLIPS et al. v. DANIEL et al.
• Court: Texas Court of Appeals

94 S.W.2d 1193

PHILLIPS et al. v. DANIEL et al.

No. 8479.

Court of Civil Appeals of Texas. Austin.

May 6, 1936.

Rehearing Denied June 3, 1936.

Appeal from District Court, Travis County; W. F. Robertson, Judge.

Action by E. B. Phillips and others against R. L. Daniel and others, wherein the defendants filed a cross-action. Judgment for defendants, and plaintiffs appeal.

Reversed and remanded with direction.

Yelderman & Yelderman, of Austin, and E. A. Camp, of Rockdale, for appellants.

Wm. McCraw, Atty. Gen., and W. W. Heath, Asst. Atty. Gen., for appellees.

BLAIR, Justice.

This litigation arose out of the following agreed facts:

Appellant Phillips-Luckey Burial Association is a voluntary unincorporated association organized for the purpose of paying not to exceed $150 of the burial expenses of its members under a mutual assessment plan. It was organized in April, 1933, with its office and place of business at Rockdale, Tex. Appellant E. B. Phillips is president and P. E. Luckey is secretary-treasurer of the association, which has adopted written by-laws and regulations with respect to all of its activities, and which govern and control the admission of members and the relation of the association to them. Written application for membership on the form prescribed is required, and when an applicant is accepted, a written certificate is issued, evidencing such membership and defining the obligation of the association to the member. The members pay dues and assessments when and if needed to pay benefits on account of deceased members, and the association pays certain sums of money contingent upon the class to which the deceased member belonged not to exceed in any instance $150; and contingent upon the deceased member having paid all dues and assessments, and upon cessation of life of the member while in good standing in accordance with the by-laws and regulations of the association. The association confines its membership to the white race and to those residing within a radius of fifty miles of its office and place of business.

On May 13, 1935, the association had some 7,000 members in good standing, and since that date has continued to solicit and accept new members and has continued to operate its business as it has since its organization. On the date mentioned what is known as House Bill 373, c. 264, Acts 44th Leg., p. 651 (Vernon's Ann. Civ.St. art. 4859f, §§ 6, 6a, 6b), became effective and section 2a (Vernon's Ann.Civ.St. art. 4859f, § 6b) reads, as follows:

"It shall be the duty of the Commissioner to require any corporation, person, firm, association, local mutual aid association or any local association, company or organization, to have a certificate of authority before being authorized to carry on any insurance business in this State. If, in any event, any such company, person, firm, association, corporation, local aid association or local organization is writing any form of insurance whatsoever without a permit, or certificate of authority issued by the Department of Insurance of Texas, it shall be the duty of the Commissioner to make known said fact to the Attorney General of the State of Texas, who is hereby required to institute proceedings in the District Court of Travis County to restrain such corporation, person, firm, association, company, local aid association or organization from writing any insurance of any kind or character without a permit."

Upon and after May 13, 1935, the effective date of said act, the life insurance commissioner informed appellant association that it would be required to obtain a certificate of authority or permit to carry on any insurance business after May 13, 1935. About May 20, 1935, the attorney for appellant association called at the office of the department of insurance and inquired as to the manner, method, or procedure for obtaining such a certificate or permit and was informed by R. L. Daniel, life insurance commissioner, that he regarded appellant association as carrying on its insurance business after May 13, 1935, in violation of the act; and that while the act did not provide the method of obtaining such a certificate or permit, the Legislature had theretofore provided at least seven methods whereby the life insurance business could be carried on; and that in order to comply with said section 2a of H. B. 373, appellant association must do one of the following things;

"1. Organize a capital stock life insurance company;

"2. Procure by purchase or otherwise one of the charters qualified under House Bill 303 of the 43rd Legislature [see Vernon's Ann.Civ.St.art. 4859f];

"3. Procure some insurance company to take over and assume the liability on its certificates;

"4. Be licensed as a local mutual aid association under the terms of Chapter 9a, of Title 78 of the Revised Civil Statutes [Vernon's Ann.Civ.St. art. 4875a-1 et seq.];

"5. Organize a legal reserve mutual insurance company under the terms of Chapter 7, Title 78, Revised Civil Statutes of Texas [article 4800 et seq.];

"6. Procure by purchase or otherwise one of those charters qualified under Chapter 6, Title 78, Revised Civil Statutes [article 4784 et seq.]."

The commissioner did not threaten to interfere with any contracts of appellant association entered into prior to the effective date of said act, but demanded that appellant association reorganize itself so as to bring its business done after the effective date of the act under one or the other character of insurance association or company, as above stated, and threatened to proceed against it if it did not comply with such demands; and accordingly certified appellant association's acts and conduct to the Attorney General, with instruction to proceed against it as directed by said act.

Whereupon appellants instituted this proceeding against appellees, the board of insurance commissioners, its members, and the Attorney General, seeking to enjoin them from interfering with the operation of such mutual insurance association and from requiring it to obtain a certificate of authority or permit to carry on its insurance business, alleging that said section 2a of House Bill 373 was and is unconstitutional because of several grounds asserted; and, in the alternative, that if said act is valid, then appellant association being exempt under section 29, c. 274, Acts 41st Leg., p. 563 (article 4875a-29, Vernon's Annotated Civil Statutes), from all other insurance laws, was and is entitled to a certificate of authority or permit to carry on its mutual aid insurance business upon showing its exempt status, and that the department of insurance should be required to grant such certificate or permit.

Appellees answered and by way of crossaction pleaded the terms of House Bill 373, and placed the same construction on section 2a of said act as had been placed upon it by the life insurance commissioner and the board of insurance commissioners.

A trial to the court without a jury resulted in judgment perpetually enjoining appellant association from contracting any new certificates or making assessments upon or paying any certificates issued by it subsequent to May 13, 1935, unless and until the association secured a certificate of authority or permit to carry on an insurance business as required by the life insurance commissioner and the board of insurance commissioners under their interpretation of said section 2a of the act; hence this appeal.

We have reached the conclusion that the trial court should have sustained or tried the case in accordance with the alternative plea of appellants, that is, as applied to the facts of this case, by the enactment of said section 2a of the act the Legislature intended to require all local mutual aid associations not theretofore required to have a certificate of authority or permit to carry on such insurance business, and exempt under...