Richardson v. Kelly, 9419.

• Decision Date: 05 April 1944
• Docket Number: No. 9419.,9419.
• Citation: 179 S.W.2d 991
• Parties: RICHARDSON et al. v. KELLY.
• Court: Texas Court of Appeals

179 S.W.2d 991

RICHARDSON et al. v. KELLY.

No. 9419.

Court of Civil Appeals of Texas. Austin.

April 5, 1944.

Rehearing Denied April 26, 1944.

Appeal from District Court, Ninety-Eighth Judicial District, Travis County; J. D. Moore, Judge.

Proceeding by Sid Richardson and others against Keith Kelly, receiver of the National Indemnity Underwriters of America, and another to set aside a judgment wherein others intervened, wherein the receiver filed a cross-action. The defendant receiver was succeeded by Herbert Marshall, who was substituted as a party defendant. From an adverse judgment, the plaintiffs and receiver appeal.

Affirmed.

Samuels, Brown, Herman & Brown, of Ft. Worth, Milburn E. Nutt, of Wichita Falls, Merrill & Scott and Wood, Gresham, McCorquodale & Martin, all of Houston, A. E. Brooks and Thorpe Andrews, both of Ft. Worth, and Sleeper, Boynton, Darden & Burleson, of Waco, for appellants.

Marion B. Solomon, of Dallas, for appellee.

BLAIR, Justice.

Appellants, Sid W. Richardson and Richardson Oils, Inc., filed this proceeding in the 98th District Court of Travis County, Texas, being cause No. 65,080, styled Sid W. Richardson et al. v. Keith Kelly, Receiver of National Indemnity Underwriters of America and C. H. Verschoyle, Inc., its attorney in fact, as a bill of review to set aside a judgment rendered by said 98th District Court in cause No. 63,621, styled Keith Kelly, Receiver of National Indemnity Underwriters of America and of C. H. Verschoyle, Inc., v. Nick Linz et al., wherein the receiver sued 29 persons, firms, or corporations as defendants and as class representatives of 3,200 subscribers at the NIU, to fix their liability for an additional annual assessment or premium, and recovered judgment against each subscriber individually for an amount equal to an additional assessment or premium for each year of the insolvency period, which was from September 30, 1936, to December 28, 1937, and during which insolvency period some 1,450 claims on policies of insurance issued at the NIU, aggregating about $400,000, arose. Several groups of subscribers, aggregating 123, filed pleas of intervention and made common cause with Sid W. Richardson and Richardson Oil, Inc., to set aside the assessment judgment, which had become final. They alleged that certain conduct of the receiver in procuring the assessment judgment amounted to fraud, and that appellant subscribers at the NIU had a meritorious defense to the assessment, in that their respective contracts limited their liability "to the amount of the premium deposit and the application fee provided for in this policy." The trial court heard these matters together and at length, the statement of facts containing 726 pages, which in part explains the several hundred pages of powers of attorney, the applications for certificates to do business, and policies issued at the office of NIU before and during the insolvency period, photostatic copies of the originals being under the order of the court sent up with the record. The trial court rendered judgment declaring that the assessment judgment in cause No. 63,621 was valid against the attacks made upon it by plaintiffs and intervenors, and upon the cross-action of the receiver rendered judgment against each of the plaintiffs and intervenors, individually, for the amount of the assessment found to be due by them, aggregating about $77,000. From such judgment or judgments plaintiffs and intervenors, appellants here, have prosecuted this appeal.

From the pleadings and evidence and the briefs of the parties, the trial court apparently determined four questions, which are presented for review here, as follows:

1. That the suit of appellants is a collateral attack upon the assessment judgment or decree rendered in cause No. 63,621.

2. That appellants were not diligent in keeping up with the receivership proceedings and in ignoring assessment notices sent out by the receiver.

3. That the receiver was not guilty of misconduct in procuring the assessment judgment.

4. That appellants did not show or prove a meritorious defense to the assessment liability determined against them by the assessment judgment or decree in cause No. 63,621.

The trial court correctly determined the fourth question. In consequence, a decision of the first, second and third questions need not be made. Suffice it to say, the evidence would support implied findings of the trial court that appellants wanted diligence in not proceeding to set aside the assessment judgment complained of before it became final, and that the receiver was not guilty of misconduct amounting to fraud in obtaining the assessment judgment in cause No. 63,621. We prefer, however, to base our decision upon the issue that appellants did not show or prove a meritorious defense to the assessment liability of the subscribers at the NIU, rather than upon the practice questions. The trial court gave appellants a full trial of the issue and as if no judgment had been rendered in cause No. 63,621. The controlling facts on the issue will be stated in substance.

In 1933, the NIU began operations as a reciprocal or interinsurance exchange, acting through its attorney in fact, C. H. Verschoyle, Inc., and undertook to organize the plan or scheme of writing insurance authorized by the provisions of Arts. 5024-5033, R.S. 1925. It issued policies insuring the subscribers thereat against liability for injuries or death of their employees under the provisions of the Workmen's Compensation Laws, which constituted about two-thirds of its business. It wrote automobile liability insurance under the statutes applicable thereto, and also a small amount of fidelity bond and other insurance. The assessments or premiums paid by the subscribers were fixed by the State Board of Insurance Commissioners at the same rates as fixed for all other insurance companies writing the same character of insurance. All application fees, assessments or premiums paid by the subscribers were commingled and placed in one "general fund," regardless of the nature of the power of attorney or the nature or kind of insurance contracts, and all losses or claims arising under all of the policies issued at the exchange or association were paid out of said general fund. The NIU never at any time segregated its various lines of insurance and made no separate assessments or segregation thereof for each line of insurance written, but continuously operated as a unit or association writing the various lines of insurance contracts under which all subscribers at the exchange undertook to indemnify each other for the loss covered.

On December 28, 1937, the 98th District Court of Travis County rendered judgment in cause No. 59,427, styled State of Texas v. National Indemnity Underwriters of America and C. H. Verschoyle, Inc., its attorney in fact, declaring the NIU to be insolvent during the period from September 30, 1936, to December 28, 1937, and appointing Jim Gaddy Norris as receiver to wind up its affairs. Norris was succeeded by Keith Kelly, who was in turn succeeded by Herbert Marshall, the present receiver.

During his tenure each receiver sought to ascertain who were subscribers at the NIU and who held claims against it. On December 5, 1939, Receiver Kelly mailed a post card to some 3,200 subscribers, informing each subscriber of the receivership of NIU; that he was the receiver; that NIU was insolvent from September 30, 1936, to December 28, 1937; that an assessment was necessary to pay claims in the sum of about $400,000 arising during the insolvency period; and that the amount of the assessment would have to be a sum equal to the amount of premiums booked and earned on the policies held by each subscriber during the insolvency period, which should be paid immediately, so that the receivership might be closed.

On June 1, 1939, under authority given in cause No. 59,427, Receiver Kelly brought the first assessment suit in said 98th District Court of Travis County, being cause No. 61,778, styled Keith Kelly, Receiver, v. Sid W. Richardson et al., naming 189 subscribers at the NIU as defendants, and seeking to establish their joint and several liability for $747,000, which amount was alleged to be owing by the NIU; and that the subscribers were liable under the terms of the contract and power of attorney attached to the petition. Defendants Sid W. Richardson and Houston Transportation Company filed pleas of privilege and other defendants filed pleas in abatement, contending that the receiver had no authority to sue; that the suit was prematurely brought; and that the power of attorney attached to the petition limited the individual liability of each subscriber at the NIU to not more than one additional premium. On December 9, 1939, the receiver dismissed this suit without disposing of the pleas of privilege or other pleas in abatement.

Between September 28, 1939, and December 5, 1939, the receiver compromised and settled with several subscribers on the basis of their liability being for one additional annual premium, which the court in cause No. 59,427, the receivership proceeding, authorized and approved, the aggregate amount so collected being several thousand dollars.

On March 25, 1940, the receiver filed in cause No. 59,427 his report of the claims against the NIU, and the master's report followed the same list, and on May 23, 1940, the court entered judgment fixing liabilities of the receiver at $340,204.26, and leaving other claims to be established. In the same cause another order was entered on April 1, 1940, authorizing and approving the settlement of another subscriber's liability for $750. And on June 29, 1940, the court authorized the receiver to bring an assessment suit against the subscribers at the NIU to pay a then existing deficit of approximately $400,000.

On July 11, 1940, Receiver Kelly filed the assessment suit in cause No. 63,621, and after a hearing on February 1, 1941, the trial court...