Southern Casualty Co. v. Morgan

• Decision Date: 02 January 1929
• Docket Number: (No. 1112-5030.)
• Citation: 12 S.W.2d 200
• Parties: SOUTHERN CASUALTY CO. v. MORGAN.
• Court: Texas Supreme Court

12 S.W.2d 200

SOUTHERN CASUALTY CO. v. MORGAN.

(No. 1112-5030.)

Commission of Appeals of Texas, Section A.

January 2, 1929.

Error to Court of Civil Appeals of Second Supreme Judicial District.

Proceeding under the Workmen's Compensation Act by Paul Morgan, claimant, against the Southern Casualty Company, insurer, for injury sustained by claimant in the employ of the City of Weatherford. Judgment for claimant on his appeal from a decision of Industrial Accident Board was reformed and affirmed by the Court of Civil Appeals (299 S. W. 476), and the insurer brings error. Affirmed.

Holland, Bartlett, Thornton & Chilton, of Dallas, for plaintiff in error.

Grindstaff, Zellers & Hutcheson, of Weatherford, for defendant in error.

NICKELS, J.

We refer to the opinion of the honorable Court of Civil Appeals (299 S. W. 476) for a complete statement of the case. What is to be said here is by way of supplement of, rather than difference with, expression of the views of that court.

In City of Tyler v. Texas Employers' Ins. Ass'n, 288 S. W. 409, it was held by the Commission of Appeals, Section B, that while the words of the Workmen's Compensation Act (Rev. St. 1925, arts. 8306-8309), taken literally, are broad enough to purport authority for a municipal corporation to become a "subscriber" — i. e., a party — to the scheme of insurance therein provided, it was not so intended, for reasons given, and hence a city is not liable for unpaid premiums or for penalties for misrepresentations about its pay rolls. See 283 S. W. 929. A reason given for the construction of the statute was that the Legislature is without power (section 52, art. 3, Constitution) to authorize a municipal corporation of the kind involved to become, in effect, a "stockholder" in the Texas Employers' Insurance Association (substantially a "mutual" company), and thus to "lend its credit," etc., or to make the "appropriation of public money" (held to be a gratuity) necessary to affecting insurance.

In Georgia Casualty Co. v. Lackey (Tex. Civ. App.) 294 S. W. 277, the Court of Civil Appeals, Tenth District, attributed an absolutely null character to the insurance contract itself, made by an incorporated city under purported authority of the statute, so as to preclude recovery by an injured employee purportedly covered thereby. This was regarded as being a consequence of the decision in City of Tyler v. Texas Employers' Ins. Ass'n, supra, and of the decisions in various cases cited in which it was held that certain "illegal" contracts, etc., were unenforceable. In the present case the Court of Civil Appeals, Second District, in a closely analogous situation, held otherwise, and writ of error was allowed principally because of the conflict of decision thus produced.

It is observed, in passing, that Texas Employers' Insurance Association in its corporate nature and method of business belongs in a class distinctive from that which includes Georgia Casualty Company or Southern Casualty Company, so-called "old line" companies.

1. Constitutional basis for the scheme of insurance and transferred liability provided in the Workmen's Compensation Law consists in agreement (a) of the employer, (b) the employee, and (c) the insurer. Middleton v. Texas Power & Light Co., 108 Tex. 96, 185 S. W. 556; Oilmen's Reciprocal Ass'n v. Franklin, 116 Tex. 59, 286 S. W. 195; Kampmann v. Cross (Tex. Civ. App.) 194 S. W. 437, writ denied; Rice v. Garrett (Tex. Civ. App.) 194 S. W. 667, writ denied; Farmers' Petr. Co. v. Shelton (Tex. Civ. App.) 202 S. W. 194, writ denied. This has partial, if not full, recognition in City of Tyler v. Texas Employers' Ins. Ass'n, supra.

The tripartite arrangement and consequent final relation between the insurer and employee are achieved in the statutory plan in this manner: (a) Without consultation of the employee, the employer and the insurer make agreement in consummation of which the employer pays a premium and the insurer issues a policy; (b) subsequently the insurance thus procured is offered to the employee upon condition that he accept its protection in lieu of common-law rights, etc., and he accepts with promise of that waiver. In points of consideration, this is observable: (1) As between the employer and the insurer, there moves from the one to the other a sum of money in return for which the insurer agrees to extend protection to the employee (as yet a stranger) if the employee later agrees to accept. (2) As between the insurer and the accepting employee, there is a promise for a promise (i. e., by the insurer to pay on contingencies and by the employee to forego claims against the employer).

2. A proceeding for compensation, brought against an insurer in respect to a policy issued to a subscriber duly authorized by the statute, is at bottom and in essence a suit upon a contract; the right vindicated and the obligation enforced are consensual. In such a case, procedure is named in the statute and by adoption in the contract. We notice the form of pleading usually before the courts include the postulate that the rights sought to be enforced and the remedies claimed are purely statutory; but, on account of what has been said, the assumption is well based only when it includes recognition of voluntary agreement to put the statutory terms into effect.

The instant proceeding was begun and prosecuted to judgment in the trial court before decision in City of Tyler v. Texas Employers' Ins. Ass'n was announced and manifestly upon the assumption that the city of Weatherford was authorized by the statute to become a "subscriber." The form of pleading adopted is that usual in cases under the statute. Hence it includes some averments of fact (rather some averments of conclusions) in description of rights and remedies claimed which are surplusage and wholly inappropriate to a case not governed by the statute. Nevertheless, and for reasons already given, it includes in expression and implications allegations of fact and prayers for relief sufficient to support recovery upon an insurance contract made outside the statute but otherwise in the manner of its terms.

3. That the "employee" (Morgan) and the "insurer" (Southern Casualty Company) had liberty to contract so long at least as they did not agree about a prohibited matter is not questionable. And there was, of course, nothing in the law or in current notions of policy or morality to forbid the instant, or a comparable, agreement as between themselves.

For instant purposes, it is assumed that, in the agreement between the city and the insurer and in using public funds to bring about the agreement the city acted without authority or in excess thereof. In view of City of Tyler v. Texas Employers' Ins. Ass'n, it did so (a) because there was no statute in force delegating authority and (b) because the authority is denied in virtue of section 52 of article 3 of the Constitution. But, in doing so, it did not violate a statute or a constitutional provision denouncing the act as criminal or affirmatively declaring it to be void. There "is a distinction familiar in the law" between "prohibiting a certain form of transaction — making it unlawful, and declaring that it, with all securities issuing out of it shall be utterly void," sufficiently illustrated in Washer v. Smyer, 109 Tex. 398, 211 S. W. 985, 4 A. L. R. 1320; and Logan v. Texas Bldg. & Loan Ass'n, 8 Tex. Civ. App. 490, 28 S. W. 141; Gilder v. Hearne, 79 Tex. 120, 14 S. W. 103; Thompson v. Samuels (Tex. Com. App.) 14 S. W. 143; State Bank of Chicago v. Holland, 103 Tex. 266, 126 S. W. 564; Fidelity & Deposit Co. v. Wiseman, 103 Tex. 286, 124 S. W. 621, 126 S. W. 1109; Mathis...