Texas Employers' Ins. Ass'n v. City of Dallas

• Decision Date: 31 March 1928
• Docket Number: (No. 10072.)
• Citation: 5 S.W.2d 614
• Parties: TEXAS EMPLOYERS' INS. ASS'N v. CITY OF DALLAS.
• Court: Texas Court of Appeals

Page 614

5 S.W.2d 614

TEXAS EMPLOYERS' INS. ASS'N v. CITY OF DALLAS.

(No. 10072.)

Court of Civil Appeals of Texas. Dallas.

March 31, 1928.

Rehearing Denied April 28, 1928.

Error from District Court, Dallas County; Louis Wilson, Judge.

Action by the City of Dallas against the Texas Employers' Insurance Association. Judgment for plaintiff, and defendant brings error. Affirmed.

Harry P. Lawther, of Dallas, and Chas. L. Black, of Austin, for plaintiff in error.

H. P. Kucera, W. Hughes Knight, and A. A. Long, Asst. City Attys., all of Dallas, for defendant in error.

JONES, C. J.

The Texas Employers' Insurance Association by this appeal challenges the correctness of a judgment of a district court of Dallas county holding its personal property, as the value of same is determined by article 4754, R. S. 1925, taxable and awarding judgment in favor of the city of Dallas in the sum of $69,555.48 as taxes, interest, and penalties owing the city from the year 1917 to the year 1924, inclusive, with a foreclosure of the tax lien authorized by the city's charter.

For convenience, the parties will be styled as they were in the court below, the city of Dallas as plaintiff, and the Texas Employers' Insurance Association as defendant.

Defendant claims that its property, assessed by the city of Dallas for taxation for the said several years, is exempt from both state and municipal taxes, for the reason that it represents funds only that it was authorized to collect and apply to a public purpose; that it is a state agency, created by the Legislature for the sole purpose of collecting and distributing funds necessary to the administration of the Workmen's Compensation Law (Rev. St. 1925, arts. 8306-8309). Defendant further contends that, in any event, such property cannot be assessed by plaintiff for the reason that the city of Austin is named as its home office in its by-laws, and that, if it should be held that it comes under the provisions of said article 4754 and that its property was subject for taxes, the power to assess and collect taxes is given exclusively to said city.

As suggested by counsel for defendant, the case presents an inquiry into (a) the nature and legal status of the defendant; (b) the legal nature of the fund that plaintiff is attempting to tax; (c) the validity of the tax assessment, if the property is held to be subject to taxation. The first two inquiries will be discussed in connection with each other, and the third in its order.

The Workmen's Compensation Law, enacted by the Legislature in 1913 and amended in many of its material provisions in 1917, made fundamental changes in the law as it had existed in reference to the liability of employers of labor for personal injuries to such employees, or for death resulting from such injuries, and the compensation afforded therefor to employees or their dependents. As to such liability, with certain designated exceptions, it abolished the common-law defenses of contributory negligence, assumed risk, and the negligence of fellow servants. To every employer of labor not within the designated exceptions, who met the conditions prescribed by the law, it abolished the cause of action that had theretofore existed in favor of the employee for personal injuries, or in favor of his beneficiaries, in case death resulted, and substituted therefor a compensation, based upon the amount of wages such employee had been earning at the time of his injury or death. This compensation was designed by the law to become immediately due and payable in the manner prescribed by the law on the happening of an injury to an employee, while engaged in the employer's work. The payment of this compensation is not to come directly from the employer, but is to come from compensation insurance, which the employer is required to have issued on his employees, as a condition to immunity from suit for damages arising from personal injuries to his employees.

In order that there would be an assurance that this plan of compensating injured employees would be made effective, there must be devised a means, both practical and dependable, to provide the funds necessary for the payment of such compensation. With this purpose in view, there was created by the Legislature, as an integral part of the Workmen's Compensation Law, the Texas Employers' Insurance Association, with power to issue policies of insurance covering personal injuries to, or death of, employees whose employers had qualified under the law. In order that the insurance association thus created might become operative at the earliest possible time, the law provided for its immediate organization by the state, and, to effectuate this purpose, the sum of $5,000 was appropriated from the general revenue to provide for the expense of its initial organization, and the Governor was empowered to appoint a board of directors from twelve employers of labor who had become subscribers to the insurance association thus created. These directors were to continue for twelve months, or until their successors were elected by the subscribers. Within twelve months, the subscribers were to meet, adopt by-laws, not inconsistent with the law creating the association, and elect the board of directors who should elect the officers of the association.

The constitutionality of the Workmen's Compensation Law was challenged soon after its enactment, and its validity established by the Supreme Court in the case of Middleton v. Texas Power & Light Co., 108 Tex. 96, 185 S. W. 556. Not only was the validity of the law established by that decision, but the legal status of the Texas Employers' Insurance Association was in some important particulars declared. One particular, in reference to the status of defendant, is that it is not a private corporation, but is an insurance association created as an agency to furnish a dependable plan for the collection of the funds necessary to meet the compensation provided for by the Workmen's Compensation Law, so that thereby both employer and employee, whose legal rights had been so radically changed by such law, at once would be secure in the new rights the law created for them. Defendant was declared by the act creating it a legal entity, vested not only with certain enumerated powers, but also with such "general corporate powers" as are necessary to the accomplishment of the purpose of its creation. Section 1 of article 8308, Revised Statutes 1925.

We cannot agree with the contention of defendant that it is a governmental agency to perform governmental functions. The right to compensation to an employee for injuries received while engaged in the work of his employer is a private right. Previous to the enactment of this law, such right was enforced by the injured employee by a suit in court against his employer. Since the enactment of such law, this right is enforced against the insurance company with whom the employer carries the compensation insurance required by the said law. While the method of compensation is changed, the status of the right remains the same. It is not the state that insures an employee against the contingency of an injury while engaged in the work of his employer, but it is the employer, by voluntarily becoming a subscriber, either to the defendant or some other insurance company writing such insurance. By abolishing certain rights of employer and employee that existed at common law, and substituting in lieu thereof rights that are purely statutory, the state did not thereby take over the enforcement of the newly created rights. By creating an insurance bureau, as an agency for the payment of the compensation allowed by the said law, the state did not thereby clothe such agency with governmental functions. Its operating funds are derived from the purely voluntary act of the employers of labor, and not from the public revenues levied and collected by the impelling power of government.

Taxes are levied by the state under its sovereign power on the property of the citizen for governmental purposes only, and the money collected is owned by the state and used only for public purposes. No part of the money collected by defendant ever becomes public revenue. It is used to discharge the obligations incurred under the insurance policies issued by it, to pay the operating expenses, and if, at the end of any calendar year, there is a surplus beyond that required by the law to be maintained in order to write a non-assessable policy, such surplus is distributed in the form of dividends to the subscribers, who correspond to the stockholders of a private corporation.

Employers of labor are permitted under the law to take out their compensation insurance in any other company that is permitted by the state to write this class of insurance, and when such insurance has been taken out such employer becomes a "subscriber" in the same sense and with the same privileges as he would if his insurance had been issued by defendant. The rate to be charged for such insurance is fixed by the state insurance commission, and is required by law to be the same for all companies writing this class of insurance. With reference to private corporations...