State ex rel. Yelkin v. Hand

• Decision Date: 23 December 1959
• Docket Number: No. 13550,13550
• Citation: 331 S.W.2d 789
• Parties: STATE of Texas ex rel. Raymond T. YELKIN et al., Appellants, v. Thomas E. HAND, Jr., et al., Appellees.
• Court: Texas Court of Appeals

Page 789

331 S.W.2d 789

STATE of Texas ex rel. Raymond T. YELKIN et al., Appellants, v. Thomas E. HAND, Jr., et al., Appellees.

No. 13550.

Court of Civil Appeals of Texas, Houston.

Dec. 23, 1959.

Rehearing Denied Jan. 14, 1960.

Further Motion for Rehearing Denied Jan. 20, 1960.

Joseph G. Resweber, County Atty., Barrow, Bland & Rehmet, David Bland, Houston, M. K. Woodward, Graves, Dougherty & Gee, Austin, for appellants.

Jack Binion, Flectcher H. Etheridge, Houston, Butler, Binion, Rice & Cook, Houston, of counsel, for appellees.

WERLEIN, Justice.

This suit was brought under Article 6253, Vernon's Ann.Civ.St., by the County Attorney of Harris County, on relation of Raymond T. Yelkin and certain other persons, hereinafter called appellants, who alleged that they and not the appellees were the properly elected directors of Columbia General Life Insurance Company and should be put in possession of such offices and the appelles ousted therefrom. The basis of appellants' contention is that the appellees, Thomas E. Hand, Jr. and J. Ed. Eisemann, III, voted in favor of themselves and the other appellees 57,241 shares of the capital stock of Columbia General Life Insurance Company which was held in an irrevocable trust for the sole use and benefit of said company. Appellants alleged that if such shares had not been voted they would have prevailed in the election of directors by 49,482 votes rather than being defeated by 7,359 votes as contended by appellees.

Appellees duly filed pleas in abatement, designated their 'Plea to the Jurisdiction' and their 'Motion to Dismiss.' From the judgment of the court sustaining in all things such plea and motion, appellants appeal.

The court made no findings of fact or conclusions of law. We shall assume that appellants' points of error recite substantially the grounds upon which the court based its judgment as no contention to the contrary is made by appellees.

By their first three points appellants complain that the Trial Court erred in holding (1) that it was without jurisdiction of this suit since the Commissioner of Insurance of the State of Texas and the State Board of Insurance of Texas had primary jurisdiction of the issue involved, (2) that it was without jurisdiction on the grounds that relators first presented their complaints to the Commissioner of Insurance, who refused to accept jurisdiction, and relators did not thereafter appeal to the State Board of Insurance and thence to the District Court of Travis County, Texas, and (3) that it was without jurisdiction on the ground that this quo warranto proceeding initiated by said County Attorney was an unlawful interference with the prosecution of business of said company.

In determining whether the Trial Court erred, it is necessary to consider both the nature of appellants' suit and the jurisdiction conferred upon the Board.

This suit is essentially an election contest to determine title to office, i. e., whether appellants or appellees were elected as directors of the company in an election on March 10, 1959. In deciding that issue, it must be determined whether appellees, Thomas E. Hand, Jr., and J. Ed. Eisemann, III, were entitled in said election of directors to exercise voting rights upon stock of said company which they had owned, after they had transferred such stock in trust for the sole benefit of the company under a trust agreement dated October 31, 1955, by and between Thomas E. Hand, Jr. and J. Ed. Eisemann, III, as trustors, and Oliver M. Bakke, Jr., as trustee. In the trust agreement it is provided that the power to vote or to direct the voting of said stock shall remain with and be vested in the trustors during the term of the trust.

Chapter 3 of the Insurance Code of Texas, V.A.T.S. governs the method and mechanics of creating life insurance companies such as the Columbia General Life Insurance Company. It also prescribes, among other things, certain procedures with respect to the election of directors and their term of office, the adoption of by-laws, the right of stockholders to inspect the records of the corporation, the filling of vacancies on the board of directors, and the holding of annual stockholders' meetings on the second Tuesday in March. Article 3.04, Sec. 4, provides in part:

'At all meetings of the stockholders, each stockholder shall be entitled to one vote for each share of stock fully paid up appearing in his name on the books of the company, which vote may be given in person or by written proxy. The majority of the paid up capital stock at any meeting of the stockholders shall be a quorum.'

We have not found, nor have we been cited to, any provision in the Insurance Code expressly controlling or governing election contests or prescribing any procedure for determining title to the office of director where such determination depends solely upon the validity of the election.

Article 1.14, Sec. 3, of the Code provides in part: 'The Board may inquire into the competence, fitness and reputation of the officers and directors of each carrier.' The purpose of such inquiry is to determine whether such officers and directors are worthy of public confidence. Said article provides the procedure to be followed by the Board and for a review by the District Court of Travis County. This article is inapplicable to the case at hand. The relief sought in the present case is the adjudication of stock voting rights and the effect thereof upon the election of directors. No attack is made upon the competence, fitness or reputation of the officers and directors of the company and no assertion is made that they are not worthy of public confidence.

The distinction between election contests and proceedings brought by private individuals to remove officers or directors because of want of competence, fitness, reputation or because of malfeasance in office, was apparently recognized by Justice Norvell in opinions written by him in the cases of Huffines v. Mercury Life & Health Co., 1945, 185 S.W.2d 239, and Hyatt v. Mercury Life & Health Co., 1947, 202 S.W.2d 320, 324, ref., n. r. e., decided by the San Antonio Court of Civil Appeals.

In the Huffines case the Court held that the trial court properly dismissed the suit because the Board of Insurance Commissioners had not exhausted the jurisdiction vested in it by law. The suit was brought by certain stockholders to reinstate Hyatt as president of the company prior to the Board of Insurance acting upon a socalled order which could have the effect of permanently removing Hyatt from office because of malfeasance in office.

In the Hyatt case an injunction suit was brought to prevent usurpers from continuing in office. The court held that such would not lie, stating:

'Any person dissatisfied with the declared result of the election and contending that he and not the declared victor actually received the greatest number of legal votes has a complete and adequate remedy at law by a suit in the nature of quo warranto or a suit for office.'

Although at the time of the decision in the Hyatt case, the Insurance Code of Texas had not been adopted, it is significant that the part of Article 3.04, Sec. 4, of the Code (Acts 1955, 54th Leg., Ch. 363) hereinabove more particularly referred to, relied upon by appellees as giving primary jurisdiction to the Commissioner of Insurance and State Board of Insurance rather than the courts in the present case, was contained in Article 3.04 of the Insurance Code (Acts 1951, 52nd Leg., Ch. 491) and also in Article 4718 of the Revised Civil Statutes of Texas, 1925. We are of the opinion, therefore, that the provisions in Article 3.04 as amended did not change the substantive law of this State in election contests as it existed at the time the Hyatt case was decided.

Article 6253, V.A.T.S., provides:

'If any person shall usurp, intrude into or unlawfully hold or execute, or is now intruded into, or now unlawfully holds or executes, any office or franchise, or any office in any corporation created by the authority of this State * * * the Attorney General or district or county attorney of the proper county or district, either on his own accord or at the instance of any individual relator, may present a petition to the district court of the proper county, or any judge thereof in vacation, for leave to file an information in the nature of a quo warranto in the name of the State of Texas. If such court or judge is satisfied that there is probable ground for the proceeding, he shall grant such leave and order the information to be filed and process to issue.' (Emphasis supplied.)

We do not think that the Legislature intended to repeal Article 6253 or any part thereof by adopting the Insurance Code. True, the Code repeals all laws in conflict therewith. The code, however, has neither expressly nor impliedly given to the Commissioner of Insurance and the State Board of Insurance jurisdiction in election contests, and hence there is no conflict between its provisions and Article 6253.

In Board of Insurance Commissioners of Texas v. Guardian Life Ins. Co., 142 Tex. 630, 180 S.W.2d 906, 908, our Supreme Court made the following statement:

'The board can exercise only such authority as is conferred upon it by law in clear and unmistakable terms and the same will not be construed as being conferred by implication. Humble Oil & Refining Co. v. Railroad Commission of Texas, 128 S.W.2d 9; Commercial Standard Ins. Co. v. Board of Insurance Com'rs of Texas, Tex.Civ.App., 34 S.W.2d 343, writ refused.'

In McFarlin v. State, Tex.Civ.App., 272 S.W.2d 630, 631, writ ref., n. r. e., involving a somewhat analogous question but not the Insurance Code, the Court held that in a case involving fact issues relating to any administrative problem, the aggrieved party must exhaust the remedies available to him through the Department of Public Education before resorting to the courts for relief. The Court then stated:

'However, we do not think...