Public Housing Administration v. Housing Authority of City of Bogalusa

• Decision Date: 10 April 1961
• Docket Number: No. 5337,5337
• Parties: PUBLIC HOUSING ADMINISTRATION v. HOUSING AUTHORITY OF the CITY OF BOGALUSA et al.
• Court: Court of Appeal of Louisiana — District of US

Page 871

129 So.2d 871

PUBLIC HOUSING ADMINISTRATION v. HOUSING AUTHORITY OF the CITY OF BOGALUSA et al.

No. 5337.

Court of Appeal of Louisiana, First Circuit.

April 10, 1961.

Rehearing Denied May 22, 1961.

Certiorari Granted June 22, 1961.

Carroll Buck, Asst. Atty. Gen., Ellis, Lancaster & King, New Orleans, Dan W. Graves, Jr., Bogalusa, for appellants.

M. Hepburn Many, U.S. Atty., A. J. Waechter, Jr., New Orleans, for appellee.

Before ELLIS, LOTTINGER, HERGET and LANDRY, Judges.

HERGET, Judge.

This is a declaratory judgment action brought by the Public Housing Administration seeking a judicial interpretation of those portions of a contract between it and Housing Authority of the City of Bogalusa, requiring that the Housing Authority insure its low-rent housing projects for fire and extended coverage with the lowest responsible bidder.

Public Housing Administration, which will be hereinafter referred to as 'Administration', is an agency of the United States. The Housing Authority of the City of Bogalusa, referred to hereinafter as 'Housing Authority' is a public corporation created and established pursuant to LSA-R.S. 40:381 et seq., and is authorized to borrow money or accept contributions from the Administration for the purpose of building and maintaining low-rent housing projects in the City of Bogalusa.

The Administration entered into an 'Annual Contributions Contract' with Housing Authority for the development and administration of two low-rent housing projects in the City of Bogalusa. Under the Annual Contributions Contract, Housing Authority was required to insure its low-rent housing projects against the losses covered by the standard Louisiana fire and extended coverage insurance policies, and was obligated to advertise for competitive bids and to award the insurance to the 'lowest responsible bidder.'

Housing Authority advertised for bids for fire and extended coverage insurance and Liberty Mutual Fire Insurance Company, hereinafter referred to as 'Liberty', submitted a bid which was stipulated to be the lowest responsible bid (providing only that Housing Authority might legally insure with a mutual insurance company under a single-premium, non-assessable policy). Housing Authority has refused to accept the bid of Liberty on the ground it believes it is forbidden by law, and particularly Article 4, Section 12 of the Louisiana Constitution of 1921, LSA, to enter into an insurance contract with a company organized on the mutual plan.

Reliance Insurance Company, a stock company hereinafter referred to as 'Reliance', submitted a bid on the same date as did Liberty, and it was stipulated that such bid was the lowest responsible bid received in the event Housing Authority may not legally insure with any mutual insurance company.

By supplemental petition Liberty and Reliance were joined as parties defendant, and by answer Housing Authority and Reliance pleaded the lowest responsible legally acceptable bid for the insurance was Reliance because the Constitution prohibits Housing Authority from insuring in a mutual insurance company. Liberty answered, pleading that the Court declare it the lowest legally responsible bidder for providing the insurance coverage, and that the Constitution does not prohibit the State or its political subdivisions, including Housing Authority, from purchasing insurance from a mutual insurance company. The Attorney General of Louisiana and a large number of independent insurance agents intervened as defendants.

Exceptions of no cause or right of action were filed on behalf of Reliance and Housing Authority, and by agreement of counsel the Court referred those exceptions to the merits.

Upon the matter being submitted on the merits, the Trial Judge rendered judgment in favor of Administration and defendant, Liberty, holding that the Louisiana Constitution does not prohibit the State or any political corporation thereof from securing insurance coverage under fixed premium, non-assessable policies from mutual insurance companies and Liberty was the lowest responsible bidder for providing fire and extended coverage insurance on Housing Authority's low-rent housing projects. From this judgment Housing Authority, Reliance and intervenors appealed suspensively to the Supreme Court of this State. The appeal, by judgment of that Court, was transferred to this Court on November 7, 1960 by virtue of LSA-R.S. 13:4441, 13:4442 upon concluding the jurisdiction to determine the issue was vested in the Court of Appeal, First Circuit, and not the Supreme Court.

By stipulations entered into between all parties, the sole question for decision is: In view of Article 4, Section 12, of the Louisiana Constitution, may the State and its political corporations, including Housing Authority, insure their property under a single-premium, non-assessable contract with a mutual insurance company?

Article 4, Section 12 of the Constitution of Louisiana provides in part:

'The funds, credit, property or things of value of the State, or of any political corporation thereof, shall not be loaned, pledged or granted to or for any person or persons, associations or corporations, public or private; nor shall the State, nor any political corporation, purchase or subscribe to the capital stock or stock of any corporation or association whatever, or for any private enterprise. Nor shall the State, nor any political corporation thereof, assume the liabilities of any political, municipal, parochial, private or other corporation or association whatsoever, except as otherwise provided in this Constitution; nor shall the State undertake to carry on the business of any such corporation or association, or become a part owner therein; * * *.'

LSA-R.S. 40:474(11) authorizes the Housing Authority to 'Insure or provide for the insurance in stock or mutual companies of any movable or immovable property or any operations of the authority against any risks it thinks advisable to insure against; * * *'.

Appellants contend Housing Authority, under the provisions of the above quoted portions of the Constitution, is prohibited from insuring in a mutual company, and that the provisions of LSA-R.S. 40:474(11) which attempts to permit local housing authorities to insure in mutual companies are unconstitutional.

It is axiomatic that the legislature of the State is vested with the law-making power and has jurisdiction on all subjects within the limitations imposed upon it by the Constitution, and there is a presumption the legislative act is constitutional. The Court in interpreting the constitutionality of an act of the legislature should not give consideration to sociological, historical, economic, political or other motives where the verbiage of the Constitution is plain, unequivocal and precise, but should apply the clear, not ambiguous provisions of the Constitution which has been termed a legislative act by the people themselves in their sovereign capacity, therefore the paramount law. Indeed, our obligation in this regard is succinctly stated in LSA-Civil Code, Article 13, as follows:

'When a law is clear and free from all ambiguity, the letter of it is not to be disregarded, under the pretext of pursuing its spirit.'

In 44 C.J.S. Insurance § 104, p. 644, we find:

'A 'mutual insurance company' may be defined generally as a co-operative enterprise in which the members are both Insurers and insured, the company and its assets being democratically owned and controlled by the members, and losses and expenses being paid for by funds derived from premiums or assessments paid in by the members. Mutuality of co-operation of the members is its distinguishing characteristic.

'A mutual insurance company may be defined as a co-operative enterprise, wherein the members constitute both insurer and insured, and contribute, by a system of premiums or assessments, to the creation of a fund from which all losses and liabilities are paid, and wherein the Profits are divided among the members in proportion to their interests. It is an enterprise the distinguishing feature of which is the mutuality of co-operation of the members who are united for that purpose, and Each of whom takes a proportionate part in the management of its affairs, being at once insurer and insured, and participates alike in its profits and losses, and all of whom are policyholders. * * *.' (Emphasis ours.)

In Appleman's Insurance Law and Practice, Chapter 344, Section 10047, at page 100, we find:

'A mutual insurance company is an association to provide mutual relief for loss, and all policyholders are members, with each having the same proportionate interest and each being liable in the same proportionate extent. As regards their rights and remedies, the policyholders in a mutual company have been considered stockholders therein the same as owners of stock in a stock corporation, where there is no charter provision to the contrary. * * *'

The constitutional provisions of the State of Louisiana which have been hereinabove quoted inhibit the State or a political subdivision thereof from using public funds for private purposes, and specifically denies the power to the legislature and its creations to loan, pledge or grant its funds, credit, property or things of value to or for all persons, associations, or corporations, public or private; purchase or subscribe to the capital stock or stock of a corporation or association or for any private enterprise; carry on the business of a private corporation, association, or private enterprise; become a part owner of a private corporation, association, or private enterprise.

Accordingly, in the light...