Court Opinion

ID: 9665218
Source: CourtListenerOpinion
Date Created: 2023-08-24 00:42:51.551631+00
Date Added: 2024-06-11T13:08:25.864897
License: Public Domain

On Motion for Rehearing.
Appellee has filed a most astounding motion. He directs very little criticism, if any, towards the disposition which we made of the two questions decided in our original opinion. Rather, appellee argues, and for the first time, that we have proceeded upon a false premise, saying: “Ap-pellee respectfully submits that the basic error contained in the opinion of this Honorable Court is the Court’s assumption that the sums paid as advance premium deposits were the advance deposits mentioned in the subscribers’ agreement or could be treated as if they were such advance deposits.”
The motion further states:
“Under this Court’s assumption, the balance remaining in the 'reserve for unearned premium deposits’ was a sum which had been dedicated by the policyholders and which the reciprocal was obliged to refund only if such sum was not needed to meet the reciprocal’s obligations. In fact an\4 at law, the 'reserve for unearned premium deposits’ was a sum which the reciprocal was absolutely obligated to repay to its policyholders, and it was in no way dedicated to the payment of the reciprocal’s other obligations, * * *
“If the distinction between an ‘advance deposit’ and an ‘advance premium deposit’ is blurred or ignored, Appellant’s arguments in this case have a specious plausibility and bear the surface appearance of being supported by the decisions in the two Southern Underwriters cases. By the use of such arguments, Appellant has obtained from this Honorable Court an opinion which can be sustained only if the provisions in the subscribers’ agreement with respect to ‘advance deposits’ can be deemed to prevail over the treatment which the statutes of this State provide for ‘advance premium deposits.’ * * *
“ * * * it is abundantly clear that neither the subscribers nor the reciprocal did anything more about the subject of ‘advance deposits’ than to make a single and fragmentary mention of such deposits in the subscribers’ agreements. Perhaps this portion of the subscribers’ agreement was blindly copied from an agreement of a reciprocal such as Southern Underwriters which actually used true ‘advance deposits.’ Perhaps the subscribers to Texas General Underwriters actually intended to use ‘advance deposits’ and to hold them intact, but later discarded the idea and didn’t put it into practice. One can only speculate with respect to matters such as these. However, certain it is from the evidence that the reciprocal never did collect ‘advance deposits’; * * 1
*161Let us examine the record.
Mr. Toepperwein, appellees’ auditor, testified:
“ * * * Now, what do you mean * * * what does that include, that reserve for unearned premium deposits? Exactly what is it. A. That is the unearned premiums or rather the unearned portion of those premium deposits from January 31, 1946, to the expiration date of all of the policies.”
The subscribers’ agreement provides:
“ * * * our liability, in addition to the premium or premium deposit specified in the contract, shall be limited to one additional annual premium or premium deposit.
“ * * * We agree to keep our Advance •Deposit intact as a Surplus for the payment of our proportion of losses and expenses, and to pay promptly all demands for monies to be used * *
Every policy issued 'by the Exchange contained these provisions:
“Limit of Liability:.- The liability of each member of this Exchange is limited to, and by its Articles of Agreement fixed and determined to be the deposit premium or paid premium; the member, by accepting this policy, assumes a contingent liability not exceeding the amount of deposit premium or premium named in the policy, which amount shall not exceed one'annual premium. * * *
“26. Special definitions and provisions— plan of operation. Wherever the words policy, insured, company and premium occur herein, they shall be taken and construed to mean contracts, subscriber, reciprocal or inter-insurance exchange and deposit respectively.”
Appellee in his pleading against appellant in this case alleged:
“Plaintiff further alleges that notwithstanding the fact that the Defendant Pacific Finance Corporation had knowledge of, or was charged with, the provision of the Subscriber’s Agreement that provided that the subscriber would keep his advance deposit intact for the purpose of paying the proportionate part of the losses of such subscriber, the Defendant Pacific Finance Corporation did cause the Attorney-in-Fact of Texas General Unnderwriters, J. Rosen-stock, and his agents Rolan C. Kennell and A. V. Cross, Jr., (the said Rosenstock being the Attorney-in-Fact of the defendant Pacific Finance Corporation and the agents Kennell-Cross being the agents of the Defendant Pacific Finance Corporation),' to return to the Pacific Finance Corporation large sums of money as return premiums which were required under the Agreement to he kept intact for the purpose of paying the losses of the exchange and that such acts on the part of the Defendant Pacific Finance Corporation were a fraud upon the creditors of Texas General Underwriters, which creditors are here and now represented by the Plaintiff. * * *
“This Plaintiff further alleges that if J. Rosenstock, Attorney-in-Fact at Texas General Underwriters, and Roland C. Ken-nell and A. V. Cross, Jr., had knowledge of the manner in which Pacific Finance Corporation operated with reference to the various and sundry insurance policies, that since J. Rosenstock was the Attorney-in-Fact of the Pacific Finance Corporation and Rolan C. Kennell and A. V. Cross, Jr., were agents of J. Rosenstock, such knowledge was merely the knowledge of the Defendant Pacific Finance Corporation and could in no manner be imputed to the creditors of Texas General Underwriters, and the Defendant Pacific Finance Corporation is here and now estopped to plead its illegal act in securing from Texas General' Underwriters, * * * return premium which was required by the contract of insurance to be kept intact for the purpose of paying losses, as against the rights of creditors."
The judgment in this case decreed:
“ * * * in addition thereto Pacific Finance Corporation and said owner became primarily liable, jointly and severally to keep intact as a surplus its or his advance deposit herein referred to; * * *
“The Court finds and concludes that each of the subscribers at Texas General Underwriters * * * was an insurer and an insured, and that each subscriber thereby became liable to keep his advance deposit *162intact for the purpose of paying his proportionate part of the losses arid expenses and became liable to pay his or its proportionate part of all losses and expenses of the whole indemnity granted by the subscribers at Texas General Underwriters, and the Attorney-in-Fact was authorized and directed to pay out of the funds deposited with him by each and all of the subscribers his or its proportionate part of the cost of exchanging indemnity, including the claims and demands made against such exchange, in an amount equal to the advance deposit and one additional annual premium or deposit premium prorated during the period of time the policy was in force during the insolvency period.
“(45) The Court finds and concludes that the policyholders at Texas General Underwriters during the period from January 31, 1946 to January 27, 1947, inclusive, failed to keep their advance deposits intact for the purpose of paying their proportionate part of the losses and expenses and are liable for an assessment for an amount equal to the advance deposit which they had agreed in the Subscriber’s Agreement to keep intact for the purpose of paying his proportionate part of the losses and expenses, which they had failed to do, and in addition thereto, * * *
“(46) The Court further finds and concludes that the advance deposit of the policyholders and subscribers at Texas General Underwriters herein referred to is the amount shovun in the policy as ‘written premium’ m that the policy provided that whenever the word premium was used, the same should mean deposit, and because the uncontroverted evidence in this case shows that the subscribers deposited said 'written premium’ deposit with the Attorney-in-Fact and his agents, R. C. Kennell and A. V. Cross, Jr., at about the time of the issuance of each of said policies, and such deposit was the only deposit required to be made and was the only deposit actually made, and further, the Texas General Underwriters Exchange required its subscribers to make advance deposits."
In Glenn H. McCarthy, Inc. v. Southern Underwriters, Tex.Civ.App., 192 S.W.2d 469, 471, the Court said: “We think it is clear from the foregoing agreement, if taken alone, that it was the purpose of the exchange and of the subscribers, through their deposits, to provide a sufficient fund to not only meet estimated costs of such insurance; but also, through keeping ‘our advance deposits intact’ to thereby provide, in addition to the contemplated needs, a surplus to pay any losses or expenses that might be incurred within the terms of the contract. Such surplus, therefore, is in addition to the actual insurance costs contemplated, and is designed to cover unanticipated losses. If appellants’ construction of the contract be correct, then no such surplus could ever be available. In support of it they rely upon certain provisions of the policy relating to what the policy designates as ‘premiums’. However, the policy itself provides that wherever the term ‘premium’ is used ‘it is a term of convenience used to designate the deposit made by the subscriber for the purpose of exchanging indemnity as herein contemplated, * *.’ ”
Yet in spite of these pleadings and judgment, in the very face of the provisions of the policies and agreements and directly opposed to the holding of this Court in the McCarthy case, appellee blithely asserts that we have misconceived the nature of the fund involved. Our disagreement with this assertion, under this record, is manifest.
We disclaim any intention of departing, in any degree, from our decisions in Howell v. Knox, Tex.Civ.App., 211 S.W. 324 (Writ ref. N.R.E.), and Archie v. Knox, Tex.Civ.App., 224 S.W.2d 504 (Writ ref. N.R.E.), relating to the standard of insolvency for a reciprocal insurance exchange. The question of whether the reserve for unearned premiums or advance deposits constitute “reserves” within the meaning of Article 19.06 of the Insurance Code is not before us because appellee has made no effort to calculate the amount of such “reserve” under the formula set out in Article 6.01 of the Insurance Code, which article he contends is applicable.
The motion is overruled.
Motion overruled.

. All italics ours.