Case Name: RICHARDSON et al. v. KELLY
Court: Supreme Court of Texas
Jurisdiction: Texas
Decision Date: 1945-12-29
Citations: 191 S.W.2d 857
Docket Number: No. A-196
Parties: RICHARDSON et al. v. KELLY.
Judges: ALEXANDER, C. J., and SHARP, J., dissenting.
Reporter: South Western Reporter Second Series
Volume: 191
Pages: 857–874

Head Matter:
RICHARDSON et al. v. KELLY.
No. A-196.
Supreme Court of Texas.
Dec. 29, 1945.
Rehearing Denied Feb. 13, 1946.
Samuels, Brown, Herman & Scott and John M. Scott, all of Fort Worth, Milburn E. Nutt, of Wichita Falls, Wood, Gresham, McCorquodale & Martin, of Houston, and Sleeper, Boynton, Darden & Burle-son, of Waco, for all petitioners except Houston Transp. Co.
Merrill & Scott, of Houston, for petitioner Houston Transp. Co.
M. B. Solomon, of Dallas, and Black, Graves & Stayton and Chas. L. Black, all of Austin, for respondent.

Opinion:
BREWSTER, Justice.
On May 2, 1945, this court handed down an opinion in this cause which a majority of the court as now constituted hold was erroneous. Accordingly that opinion is withdrawn, the judgment entered thereon is set aside, and the following is substituted as the opinion of the Court.
This is a bill of review filed by Sid W. Richardson and Richardson Oils, Inc., petitioners, against Keith Kelly, as receiver of National Indemnity Underwriters of America (NIU) and of C. H. Verschoyle, Inc., attorney in fact of NIU, respondent, to vacate a judgment rendered by the district court of Travis county. Numerous parties intervened as plaintiffs, and one of them, Houston Transportation Company, is a petitioner. A trial court judgment, adverse to plaintiffs and intervenors, was affirmed by the court of civil appeals. 179 S.W.2d 991.
NIU was an interinsurance exchange, organized under Arts. 5024 to 5033, R.S. 1925. Insurance against claims under the workmen's compensation statutes was its principal business, although it wrote automobile liability, fidelity bond and other insurance. Petitioners and some 3200 others became members by executing a power of attorney by which each appointed Ver-schoyle attorney in fact to act in the name of each, to exchange indemnity contracts among the subscribers and to bind them on applications by other subscribers on such terms and conditions as Verschoyle might deem proper, to adjust and pay off claims under subscriber contracts, to demand, receive and disburse all moneys due by subscribers, "to accept service of process and to appear for me in any suits, actions or proceedings and bring, prosecute, defend, compromise, settle or adjust same," and "to perform every act not herein specially mentioned that could be performed in relation to any contract thereby authorized."
On December 28, 1937, upon petition of the State of Texas against NIU and Ver-schoyle, its attorney in fact, the district court of Travis county adjudged that NIU was insolvent from September 30, 1936, to December 28, 1937, and appointed one Norris as receiver to liquidate its business. Norris was succeeded by Kelly and Kelly by Herbert Marshall.
On June 1, 1939, Kelly, receiver, sued NIU, petitioners and 190 other defendants in cause No. 61778 in the district court of Travis county seeking to hold them liable as partners for $747,000 as judgments and other liabilities due by NIU.. Petitioners Sid W. Richardson and Houston Transportation Company filed pleas of privilege which were controverted by Kelly, but no disposition was ever made of them. On December 9, 1939, on motion of Kelly,...the case was dismissed "without prejudme."
On December 11, 1939, Kelly mailed post card notice to all subscribers that claims aggregating $400,000 had been established against NIU and that, to pay them, "it is necessary that all subscribers to this reciprocal during the period of its insolvency make payment to me of an amount equal to one annual premium on all policies held or contracted for by said subscribers."
On June 29, 1940, Kelly filed in the receivership action a motion stating that the liabilities of NIU exceeded its assets by some $400,000 and asking authority to collect from its former subscribers "what is termed an assessment, because of their membership." The court ordered Kelly to file "such suit for the purpose of establishing such liability against said former subscribers, in order to collect such assessment for which they may be liable, the form of said suit to be determined by the said Receiver." •
On July 11, 1940, pursuant to this order, Kelly, as receiver and trustee for NIU and Verschoyle, filed suit in cause No. 63621 against 28 named defendants "and all other subscribers and policyholders" of NIU during its insolvency, alleging that "each and all of said subscribers are obligated, bound and have promised to pay into the exchange, in addition to the premiums charged in said indemnity contracts, an amount of money equal to an additional annual premium, which amount. will be necessary to discharge the obligations of the said subscribers for the losses, claims and expenses incurred." Petitioners were not named as defendants, but Kelly's prayer was that the 28 defendants be required, individually and as representatives of' all subscribers, to take notice of the suit and^that judgment be rendered fixing the liability of each named defendant and all other subscribers during the insolvency period, as a class, and that it be fixed at one additional premiumj
In his judgment, rendered March 8, 1941, the trial court found that the named defendants and all other subscribers had authorized Verschoyle to act for them in exchanging reciprocal insurance,, to collect moneys due by them and to appear for them in any legal action; that Verschoyle had authority to bind them severally but not jointly; that each subscriber was an insurer as well as an insured and was liable to pay his pro rata part of all losses; that an assessment of one additional annual premium on each policy in force during any part or all of the insolvency period was the most equitable manner in which to pay the liabilities of NIU; and that jthe defendants named "are truly representative of all subscribers and fairly and actually represent the whole class of subscribers.^) It adjudged that the receiver recover «'from each defendant an amount of money equal to a full annual premium on each policy during the insolvency period and that the judgment should bind all subscribers because they\constitute a class whose rights are fairly amd truly represente^herein by the named defendants appearing and answering ' (Italics ours.)
\£hree defendants gave notice of appeal but none was ever perfectedDfo the judgment became final on April ⅝ 1941.
This suit was filed May 16, 1941. The plaintiffs alleged that they had no notice, actual or constructive, of the pendency of cause No. 63621, and did not learn of the judgment therein until April 12, 1941, when it was too late to appeal; that as they had been parties to cause No. 61778 they had reason to assume that they would be made parties to any subsequent suit or at least be' notified so that they could intervene; that those. sued in cause No. 63621 were persons whose liability was small and were purposely selected so that they would have neither incentive nor ability to defend the suit; that, therefore, Kelly had not pro ceeded with the degree of fairness and good faith which equity requires in class actions; and that their failure to discover the pendency of the suit or sooner to learn of the judgment therein was not due to any negligence on their part. They alleged that the judgment was invalid because less than one per cent of the subscribers were parties defendant; that of those sued two were dismissed and default judgment was taken against six; that although the others filed formal answer, only five appeared at the trial and they offered no testimony and cross examined no witnesses; that Kelly was negotiating before the trial with other defendants for settlement of their liability, thereby lessening the possibility of a contest; that of the three defendants giving notice of appeal, the liability of one was only $18 while Kelly settled with the other two within two weeks after the judgment became final, which precluded any appeal. They alleged, further, that had they known of the suit they would have intervened with "good and sufficient defenses," because under their power of attorney to Verschoyle they were not liable for any assessment, all of which appeared in the application, agreement and power of attorney adopted by all subscribers and filed with the state insurance commission; that, therefore, Kelly's allegation that they were liable for a further assessment was false and a fraud on the court; and that, if construed as a valid adjudication of their liability, the judgment would deprive them of their property without due process of law.
Petitioner Houston . Transportation Company, Intervenor, alleged that it had three policies with NIU from June 15, 1936, to September 1, 1937; that the powef of attorney, applications and agreements by which it became a subscriber did not permit the assessment of an additional annual premium but expressly limited its liability to any surplus from premiums paid; that the demand asserted by Kelly in cause No. 61778 was essentially the same as that asserted in cause No. 63621; that it filed a plea of privilege in cause No. 61778, which Kelly controverted but failed to have heard; that, instead, he dismissed the case after learning that it would defend on the ground of its limited liability, so it had a right to assume that it would be made a party to any other litigation or be notified thereof; that it had no notice of the pen-dency of cause No. 63621 or of the judgment therein until March, 1942; that it then immediately intervened in this suit; that cause No. 63621, in so far as the judgment fixed intervenor's liability, was a fraud upon the court and a denial of due process.
By cross action respondent pleaded that the judgment in cause No. 63621 is res ad-judicata of the matters sought to be litigated herein and prayed recovery against petitioners and all intervenors for the amounts therein adjudged to be due. In the alternative, he prayed that if the question of the liability of subscribers was reached, the court adjudge an assessment of 276 per cent of premiums booked and earned as the amount necessary to pay the obligations of NIU and the expenses of liquidation.
The trial court held that the judgment in cause No. 63621 was valid and decreed that Kelly recover from the plaintififs and intervenors on his cross action for the assessment liability fixed against them by that judgment.
The court of civil appeals affirmed on the ground that petitioners failed to prove that they had a meritorious defense to the assessment liability asserted by Kelly in cause No. 63621.
Petitioners urge that the judgment in cause No. 63621 is void because that suit was not maintainable as a class suit.
That question is foreclosed by the decision in Southern Ornamental Iron Works v. Morrow, 101 S.W.2d 336, by the Court of Civil Appeals at Fort Worth, in which an application for a writ of error was refused by this court.
The facts in that case are closely parallel to those in this. Lumbermen's Reciprocal Association was an interinsurance exchange in which the members entered into the same character of contracts and powers of attorney with Christie & Hobby, Inc., as their attorney in fact, binding themselves severally to pay their respective pro rata parts of any deficits sustained by the association in the operation of its business not to exceed one additional annual premium. Upon a showing that the association had become insolvent because its liabilities exceeded its assets by $625,483.32, Morrow was appointed receiver to marshal its assets. Morrow filed suit against 28 of the approximately 4000 subscribers of the association, suing them individually and as representatives of all subscribers, alleging that the suit was brought as a class action to establish and fix the assessment liability of all because it was impracticable and impossible to sue and serve with process 4000 subscribers. The court found that each subscriber of the association was liable under his contract for his respective proportionate part of the deficit and that an assessment of 33 per cent, of each premium booked and earned was necessary to meet the deficit. The judgment made the 33 per cent, assessment and ordered Morrow, as receiver, to collect it. No defendant appealed. Both the receivership and class suit were brought in the district court of Travis county.
Morrow then sued Southern Ornamental Iron Works in the district court of Tar-rant county to recover $1429.33 as the assessment due by it as a subscriber to the association under the class suit judgment. Among other defenses, the defendant pleaded that the class suit judgment was void (1) because it was not named as a defendant in the suit, was not served with process, and did not in any way answer or appear, and (2) because the suit was not conducted against a fair representative class of all subscribers, in that the interests of the respective subscribers mere never to be common nor were the subscribers interested in a common fund but the interests of some were adverse to the interests of others. Proceeding on the theory that the judgment in the class suit foreclosed any issue as to whether the association was insolvent and what assessment on each premium booked and earned was necessary against each of the 4000 subscribers to liquidate its liabilities because it was predicated upon an express finding that the 4000 subscribers constituted a class whose rights as such were fairly represented by the 28 defendants sued, the trial court rendered judgment against the defendant. This action was affirmed by the court of civil appeals, which said, "We are thoroughly convinced that cause No. 51867 in Travis county district court was a proper class suit." 101 S.W.2d 343. Then, with the question squarely presented In an application for a writ of error, this court approved the holding, thereby pointing the bench and bar of this state to a proper method of assessing subscribers at a reciprocal insurance exchange when that necessity arises.
That the method so approved has since been pursued and the effects that would follow a holding now that it is invalid are well stated in an amicus curiae brief filed herein by the attorney general in behalf of the State of Texas, as follows: "In conformity with the statutes as construed by the court in the Farmers Gin Company and the Southern Ornamental Iron Works Company cases cited above, the Attorney General has brought suits to wind up the affairs of several separate reciprocal insurance associations, and has placed them in the hands of the statutory receiver. In three or four of such suits, as in the case at bar, the receiver has brought a class-action suit against all the subscribers, and the District Court as in the case at bar has determined the amount necessary to be raised to liquidate said companies, and has levied an assessment. The subscribers in whose various reciprocal insurance associations have in more than one thousand instances, in virtue thereof, paid said assessments, and there are now some of these judgments that are being collected under and in virtue of a class assessment. The effect of the court's decision in the case at bar has declared all of said judgments void, and thereby jeopardized the power of the receiver to collect the unpaid assessments levied against those subscribers who have not at this time actually paid same. It also has the effect of saying to all those hundreds of subscribers who have paid that the court now finds it (the court) was wrong in holding that they could be bound by a class suit." That statement offers a compelling reason why this court should not now overrule Southern Ornamental Iron Works v. Morrow unless convinced that it is clearly wrong. We are not so convinced. On the contrary, we are satisfied that that decision is sound and well supported by the authorities.
One case cited in that decision is Supreme Tribe of Ben Hur v. Cauble et al., 255 U.S. 356, 41 S.Ct. 338, 65 L.Ed. 673. The Tribe of Ben Hur, a fraternal benefit association, reorganized so that it would have two classes of members, A and B, Class A to embrace all former members and Class B to consist of all new members and such of the old as should transfer to it. The plan required that the mortuary funds of the two classes should be separate and distinct, but that a member transferring from A to B should take with him his interest in the mortuary fund of Class A. 524 members of Class A brought suit in the United States District Court of Indiana to enjoin this reorganization and to "prevent threatened insolvency" of the association. The suit was a class suit brought and prosecuted for the benefit of all members of Class A, of whom there were more than 70,000. After a hearing, a master's report was filed finding that "this was strictly a class suit, presenting questions of common interest to all the members of Class A, and affecting their joint interests in funds and in internal management of the society." The court entered a final decree dismissing complainants' bill for want of equity, which was not appealed from. 264 F. 247. Later Cauble and other members of Class A who were not parties to the suit, except as members of the alleged class, sought to relitigate the questions settled in that suit, in the state courts of Indiana. In holding that they could be enjoined by the United States district court in Indiana from proceeding with their suit in the state courts, the Supreme Court said [235 U.S. 356, 41 S.Ct. 342] : "If the Federal courts are to have the jurisdiction in class suits to which they are obviously entitled, the decree when rendered must bind all of the class properly represented. The parties and the subject-matter are within the court's jurisdiction. It is impossible to name all of the class as parties, where, as here, its membership is too numerous to bring into court. The subject-matter included the control and disposition of the funds of a beneficial organization, and was properly cognizable in a court of equity. The parties bringing the suit truly represented the interested class. If the decree is to be effective and conflicting judgments are to be avoided, all of the class must be concluded by the decree." In its opinion the court cites Smith v. Swormstedt, 16 How. 288, 14 L. Ed. 942, which holds that a class suit is maintainable "where the subject-matter of the suit is common to all." (Italics ours.)
In Hartford Life Ins. Co. v. Ibs. 237 U. S. 662, 35 S.Ct. 692, 695, 59 L.Ed. 1165, L.R.A.1916A, 765, the company issued to one Ibs a certificate of membership on the mutual assessment plan. Later the policy was forfeited by the company because of Ibs' failure to pay an assessment of $35.95, which was his pro rata part of a sum necessary to be raised to meet 145 pending claims, although there was sufficient money in the mortuary fund to satisfy them when the.assessment was levied. Ibs died without paying the assessment, so his widow brought suit in a state court in Minnesota to recover on the policy, claiming the $35.-95 assessment was invalid because moneys then in the mortuary fund were sufficient to liquidate all outstanding claims. The company answered that its rights in that regard had been adjudicated in a suit brought by 31 members of the company in a Connecticut court, "in their own behalf and on behalf of all others similarly situated," directly questioning its power to assess members when it had sufficient margin in its mortuary fund to meet all current claims; that the court had upheld its right to make the assessment. The Supreme Court held that the Connecticut judgment was binding on Ibs and all other members of the company's mutual department, pointing out that since the fund was created by the contributions of thousands of members, their interest ivas common. Then the Court said: "In order that the decree should be binding upon those certificate holders, who were not actually parties to the proceeding, it had to appear that complainants had an interest that was, in fact, similar to that of the other members of the class, and that it was impracticable for all concerned to be made parties. But, when such common interest in fact did exist, it was proper that a class suit should be brought . The decree in such a suit, brought by the company against some members, as representatives of all, or brought against the company by thirty certificate holders for 'the benefit of themselves and all others similarly situated,' would be binding upon all other certificate holders." (Italics ours.)
In the Ibs case the court cites, as one supporting authority, Supreme Council of Royal Arcanum v. Green, 237 U.S. 531, 35 S.Ct. 724, 727, 59 L.Ed. 1089, L.R.A.1916A, 771, decided the same day, wherein Royal Arcanum, incorporated as a fraternal beneficiary society to pay death benefits to widows and orphans of members on the assessment plan, had increased its rates by amending its bylaws. Thereafter 16 members filed a suit in behalf of themselves and all other certificate holders attacking the increase as violative of contract rights, but the increase was held valid. Four years later Green, an original member, quit making the increased payments and brought suit to have the increase declared void and to enjoin Royal Arcanum from ever exacting from him any more than his original rate. In holding conclusive the judgment in the class suit that the rate increase was valid, the Supreme Court said: "The accuracy of this conclusion is irresistibly manifested by considering the intrinsic relation between each and all the members concerning their duty to pay assessments and the resulting indivisible unity between them in the fund from which their rights were to be enjoyed. The contradiction in terms is apparent which would.rise from holding, on the one hand, that there was a collective and unified standard of duty and obligation on the part of the members themselves and the corporation, and saying, on the other hand, that the duty of members was to be tested isolatedly and individually by resorting not to one source of authority applicable to all, but by applying many divergent, variable, and conflicting criteria. In fact, their destructive effect has long since been, recognized." (Italics ours.)
In the cases . reviewed neither the question of joint or several liability nor the fact as to whether the thing sought to be enforced was a right fenjoyed by the member or a liability owed by him was a determining factor. The court went beyond those considerations to a common interest in a fund which was created by the common duty of all members to pay assessments and from which their rights to protection from loss were to flow, in determining that the subject matter was such that a class suit prosecuted by or against a few members bound all. As said in Supreme Council Royal Arcanum v. Green, supra, the duty of all members to pay assessments resulted in an "indivisible unity between them in the fund from which their rights were to be enjoyed." As to the effect of two of these cases, a standard writer says: "The rights enforced in such leading cases as Supreme Tribe of Ben Hur v. Cauble [supra] and Smith v. Swormstedt [infra] are properly denominated as common rights. In these cases the action did not involve joint rights running to or against an incorporated association." 2 Moore's Fed.Prac., p. 2239. So, both in Southern Ornamental Iron Works v. Morrow, supra, and in this case, although the liability of each subscriber was several, it was properly recognized that^he duty to pay assessments was common to all and resulted in a "unity between them in the fund from which their rights were to be enjoyed," and that, therefore, it was a duty which could be enforced in a class suit. Doubtless that is what led Professor Moore, after observing that the holding in Supreme Tribe of Ben Plur v. Cauble that the common rights of certificate holders can be enforced by class suit "has found eager approval," to say: "In the very recent case of Southern Ornamental Iron Works v. Morrow, a member of a reciprocal insurance company resisted collection of an assessment levied against it by the reciprocal. It insisted that it was not bound by a former decree wherein twenty-seven subscribers of the reciprocal were sued as representatives of the 4,000 members, and judgment rendered against them. The fact that a local statute provided that 'no judgment shall be rendered against a defendant unless' he is personally served did not deter the court from holding (1) that the action came under the classification of a 'true class suit,' and (2) that as the representatives were personally served the former adjudication was res adjudicata," 2 Moore's Fed. Prac., p. 2289.
Prior to the decision in Southern Ornamental Iron Works v. Morrow it was held in Irwin et al. v. Missouri Valley Bridge & Iron Co., 7 Cir., 19 F.2d 300, 303, cer-tiorari denied 275 U.S. 540, 48 S.Ct. 36, 72 L.Ed. 415, that the members of a reciprocal insurance association could be assessed through the device of a class suit, the opinion stating that the facts of the case bring it "squarely within the holding of Supreme Tribe of Ben Hur v. Cauble," supra. Subsequent cases to the same effect are Mitchell v. Pacific Greyhound Lines, Inc., et al., 33 Cal.App.2d 53, 91 P.2d 176, and Gray et al. v. Moore, Tex.Civ.App., 172 S.W.2d 746, in which latter case this court refused an application for writ of error, for want of merit, and in which the Court of Civil Appeals at Amarillo expressly relied on Southern Ornamental Iron Works v. Morrow in holding that a suit against 32 of 6508 subscribers at a reciprocal insurance association to fix proportionate assessments against all 6508 members to satisfy the unpaid demands of 2356 claimants was "a proper class suit."
As a matter of course, some of the members involved in the three cases last cited held claims and were therefore interested in having the assessments paid while others had no claims pending and so were oppositely interested, nevertheless that fact did not keep the courts from holding that the duty of all subscribers to pay the needed assessments in order to effect the common, contractual purpose to protect all by means of inter-insurance resulted in a common interest and unity between them and rendered the subject matter of the suit common to all. In other words, no subscriber was "free alternatively either to assert rights or to challenge them," as he was in Hansberry v. Lee, 311 U.S. 32, 61 S.Ct. 115, 119, 85 L.Ed. 22, 132 A.L.R. 741. In one of the cases,the court takes notice of the rule that no subscriber at a reciprocal exchange can set off his claim as an insured against his liability as an insurer. Mitchell v. Pacific Greyhound Lines, Inc., et al., supra. Setoff was expressly prohibited in the class suit judgment in this case.
We adhere to the decision in Southern Ornamental Iron Works v. Morrow, and hold, therefore, that cause No. 63621, under review in this case, was a true class suit, the judgment in which was binding on all who were subscribers at NIU during the insolvency period in its findings that an assessment was necessary, that the liabilities of the association amounted to $478,-693.93 and that they were to be liquidated by assessing each subscriber "an amount of money equal to a full annual premium on each policy during the insolvency period."
In a supplemental written argument on motion for a rehearing, filed on July 20, 1945, petitioners Richardson and Richardson Oils, Inc., for the first time cite Christopher v. Brusselback, 302 U.S. 500, 58 S.Ct. 350, 351, 82 L.Ed. 388, in support of their contention that the judgment under review is void. We believe that decision is in no sense contrary to our conclusion in this case or to Southern Ornamental Iron Works v. Morrow. Brusselback and other owners of bonds issued by Chicago Joint Stock Land Bank, which had been created under the Federal Farm Loan Act, 12 U.S.C.A. § 641 et seq., sued certain citizens of Ohio in the District Court of the United States for the Southern District of Ohio as stockholders of the bank, under a section of that Act which provides: "Shareholders of every joint-stock land bank organized under this act shall be held individually responsible, equally and rata-'bly, and not one for another, for all contracts, debts, and engagements of such bank to the extent of the amount of stock owned by them at the par value thereof, in addition to the amount paid in and represented by their shares." § 16. Brusselback et al. sought recovery of a 100 per cent, assessment on the theory that both the insolvency of the bank and the liability of stockholders for an assessment of 100 per cent, of their stock to pay its creditors had been adjudicated -in a previous suit in the District Court of the United States for the Northern District of Illinois. The Illinois suit was against all stockholders, but only those residing in Illinois were served with process; nevertheless Brusselback et al. alleged in the Ohio suit that the Illinois action was a class suit, judgment in which was fully binding on the Ohio defendants although they were not served therein. So, as the Supreme Court noted, the question thus presented was "whether petitioners are bound by the Illinois adjudication, in their absence, of the bank's insolvency, and the amount of the assessment." After pointing out (1) that the Federal Farm Loan Act did not give the Federal Farm Loan Board any power to assess stockholders or a receiver of. a defunct joint stock land bank any authority to maintain suit to enforce their statutory liability and did not otherwise set up any machinery to enforce that liability; and (2) that the Ohio defendants had not taken their stock in the face of either a statute or a corporate rule that membership carried with it a possibility that the bank might stand in judgment for them, the court said that the Ohio defendants could not be held to have subjected themselves to a procedure for determining in their absence essential conditions of liability, such as the bank's insolvency and the amount necessary to be assessed against stockholders to liquidate it. Under those circumstances the court said, therefore, that the assessment liability of the stockholders of a joint stock land bank is to its creditors only and that the only way creditors can enforce that liability is "an adversary suit in equity against the stockholders, wherever they may be found." Then it is said that, since the Illinois action was not such a suit, the decree therein was not res adjudicata as to the Ohio defendants.
The full import of the phrase, "an adversary suit in equity against the stockholders wherever they may be found," is clearly stated by the same writer, Mr. Justice Stone, in his latea opinion in Russell v. Todd, 309 U.S. 280, 60 S.Ct. 527, 530, 84 L.Ed. 754, in these words: "As the liability of the stockholders as prescribed by this section is to pay 'equally and ratably', the sole remedy is by plenary representative suit brought in equity in behalf of all creditors of the bank, in which the existence and extent of insolvency, and the ratable shares of the contribution by shareholders can be ascertained and an equitable distribution made of the fund recovered. But this amount cannot be determined and its distribution effected without resort to the procedures traditionally employed by equity upon a bill for an accounting and for the distribution of a fund brought into its custody." That the suit filed in Illinois did not even purport to be such an action as that described by Mr. Justice Stone as a correct "plenary representative suit" is readily apparent from the following quotation from the opinion of the Circuit Court of Appeals in Brusselback v. Arnovitz, 6 Cir., 87 F.2d 761, 762, in which the court is stating the allegations in the Ohio suit regarding the Illinois suit: "That about October 1, 1932, certain bondholders of the bank filed their bill in the United States District Court for the Northern District of Illinois against its stockholders for the purpose of enforcing their individual liabilities under the statute. that service was had upon all stockholders found residing in Illinois who for the most part answered; that the cause was referred to a master, who found the bank insolvent in that its liabilities exceeded its assets by approximately $12,000,000 and that an assessment of 100 per cent, against the stockholders would be necessary; that a decree was entered confirming the master's report and making a 100 per cent, assessment against the stockholders, and that the defendants who were before the court were directed to pay such assessments to the receiver." (Italics ours.) In short, the Illinois action was not filed, conducted or adjudicated as a class suit; hence it could " not, " under the specifications laid down in Russell v. Todd, supra, properly be held that it was such a suit.
We think what we have said is sufficient to show that the holding in Christopher v. Brusselback, supra, in no way militates against the holding in Southern Ornamental Iron Works v. Morrow and that our holding in this case, under the situation before us, is likewise not counter to the decision in the Brusselback case. And doubtless this court so regarded that case when in 1943 it refused for want of merit the application for writ of error in Gray et al. v. Moore, supra, wherein one point'of error was, "The petitioners were deprived of due process of law in Cause No. 64395, and the class judgment as to them was and is therefore void, and the trial court as well as the Court of Civil Appeals erred in not so holding herein," and in support of which the petitioners argued: "It is well established in the law that there must be an identity or community of interests essential to the class before members of the class can be bound by the actual representation of the named defendants. The interests of the class as a whole must receive actual and efficient protection, otherwise the decree cannot be binding on the class. In the case at bar we find no such identity or community of interest and no actual protection whatever."
A short quotation from Hansberry v. Lee, 311 U.S. 32, 61 S.Ct. 115, 120, 85 L.Ed. 22, 132 A.L.R. 741, relied on by petitioners, will be sufficient to show that our conclusion in this case is not contrary thereto. It is: "The plaintiffs in the Burke case [Burke v. Kleiman, 277 Ill.App. 519], sought to compel performance of the agreement in .behalf of themselves and all others similarly situated. They did not designate the defendants in the suit ats a class or seek any injunction or other relief against others than the named defendants, cmd the decree which was entered did not purport to bind others." (Italics ours.) It was the judgment in the Burke case which Lee et al. claimed was a class judgment res adjudicata of the issues in Hans-berry v. Lee. But the court very properly refused to ascribe to it any more force than it claimed for itself.
We are not unmindful of the allegations of petitioners as to the manner in which the receiver selected defendants and proceeded with the litigation in cause No. 63621, as we have detailed them above, their substance being that defendants were named who would have neither incentive nor ability to defend the suit and who could be dissuaded from appealing. The trial judge must have weighed all those matters in light of the testimony, except possibly the receiver's settlement with two defendants after judgment, yet as a part of his judgment he decreed that all subscribers were bound by it because they "constitute a class whose rights are fairly and truly represented herein by the named defendants appearing and answering." (Italics ours.) In view of that recitation we find nothing in the record which would justify us in holding that the matters complained of resulted in any vice in the judgment. See Gray et al. v. Moore, supra, wherein the allegations as to the receiver's purposeful selection of defendants are strikingly like those made by petitioners in this case, yet it was held both that the pleadings were insufficient and that the evidence did not support the claim that the subscribers sued failed to represent the class truly, fairly and adequately.
That nobody appealed from the judgment is not alone of determining consequence. It affirmatively appears that there was no appeal in either Southern Ornamental Iron Works v. Morrow or Supreme Tribe of Ben Hur v. Cauble, supra.
We hold that the judgment in cause No. 63621 was neither void nor voidable, therefore it is unnecessary for us to consider other questions raised by petitioners.
Since the class suit judgment was valid and since the only defenses pleaded by petitioners, as cross defendants, were their several attacks on its validity, it only remained for the receiver, in order to recover on his cross action against petitioners, to show that they were subscribers during the insolvency period and the amount of the annual premiums paid by them during that period. There is no controversy in relation to those issues, and that the evidence amply supports the judgment as to them is not questioned.
Accordingly, both judgments below are affirmed.
ALEXANDER, C. J., and SHARP, J., dissenting.
SIMPSON, J., disqualified and not sitting.