Court Opinion

ID: 9858975
Source: CourtListenerOpinion
Date Created: 2023-09-24 17:55:01.613708+00
Date Added: 2024-06-11T10:13:47.711318
License: Public Domain

SANDERS, Justice
(dissenting).
The sole question for decision in this case is the constitutionality of LSA-R.S. 40:474 (11) insofar as it authorizes a housing authority to insure its property with mutual insurance companies. This statute is attacked on the ground that it is violative of Section 12 of Article IV of the Louisiana Constitution. The assailed statute reads as follows:
“An authority * * * may:
Hi ‡ H< H1 Hí H*
“Insure or provide for the insurance in stock or mutual companies of any movable or immovable property or any operations of the authority against any risks it thinks advisable to insure against * *
The district court sustained the statute. On appeal the Court of Appeal struck it down.
The parties concede that the policy in the instant case is a single-premium, non-assessable fire and extended coverage insurance policy. Under such a contract the cost of the protection is fixed, and no liability for assessment exists. The holder is not subject to any contingent liability. As an incident of the insurance, the holder becomes a member of the company, entitled to receive dividends.
Under familiar principles of constitutional law, the validity of a statute is presumed, and it is the duty of the court to uphold it unless it clearly violates a particular constitutional provision. A court should not *559lightly brush aside a solemn expression of the legislative will.1
In State ex rel. Labauve v. Michel, 121 La. 374, 46 So. 430, 432, this Court stated:
“ * * * the Legislature exercises the entire legislative power of the state, except in so far as some limitation has been imposed by the state Constitution, and that, therefore, for successfully assailing the constitutionality of any statute, it is necessary to point out some particular provision of the Constitution which has taken away from the Legislature the power to pass it. We will observe, further, that every doubt must be resolved in favor of the statute. The Legislature is, of necessity, in the first instance to be the judge of its own constitutional powers. Their manifest duty is never to exercise a power of doubtful constitutionality. Doubt in their case, as in that of the court, should be conclusive against all affirmative action. If a court in such case were to annul the law while entertaining doubts upon the subject, it would present the absurdity of one department of the government overturning, in doubt, what another had established in settled conviction, and to make the dubious constructions of the judiciary outweigh the fixed conclusions of the General Assembly.”
The majority opinion formulates the following basic statement of the constitutional law:
“ * * * it matters not that the fourth clause of Section 12 of Article 4 applies only to the State, for it neither adds nor detracts from the effectiveness of the manifest meaning and purpose of the first three clauses which, in sum, reprobate investment by any state agency in a private btisiness.” (Italics supplied)
Then, concluding that the purchase of an insurance policy in a mutual company is a subscription to its capital (or an investment), the decision is reached that the statute is unconstitutional.
I am unable to concur in this disposition of the case. The salient aspect of this approach is that no specific prohibition of the lengthy section of the Constitution is identified as the controlling premise. Rather, reliance is had upon the aggregate of three diverse clauses — in effect, an appeal to the “brooding spirit” of the Constitution. Moreover, the conclusion that the purchase of mutual insurance is an investment passes over the essential nature of the insurance transaction: a purchase of protection on *561public property against loss by fire and other hazards.
The constitutional provision must be interpreted in the light of the evils sought to be prohibited. The purpose of this section of the Louisiana Constitution, like similar provisions in the Constitutions of forty-three other states, was to prevent the state Legislature from using public funds to subsidize private speculative ventures such as banks, canals, and railroads in which there was risk of financial disaster to the state. It was never intended to deprive a political corporation, such as the Housing Authority, of the privilege of purchasing insurance from any insurance company.
That this was the purpose of this Section was recognized by this Court in the early case of Benedict v. City of New Orleans, 115 La. 645, 39 So. 792, wherein it said:
“What the Article aims at is the propensity which the state manifested in the past to join in enterprises of a quasi private character, and even of a wholly private character, such as banking. The article was never intended to hamper the government of the state in the performance of public duties * *. In conducting the ordinary business of the state, and availing itself to that end of the means in its judgment most suitable, the Legislature of Louisiana is as free and untrammeled as that of any other state * *
With the history and purpose of this article in mind, I now proceed to examine each of its clauses.
Clause one: “The funds, credit, property or things of value of the State, or of any political corporation thereof, shall not be loaned, pledged or granted to or for any person or persons, associations or corporations, public or private * *
As is evident from its language, this clause bans only the disposition of the funds, credit, or property of the state or of its political corporations to aid any person or any corporation, public or private. Morever, it has no application to a governmental transaction for which there is an adequate consideration.2 Thus it does not apply to the payment by a political corporation of a premium for insurance on public property. The premium is the same for all insurance companies. The rate is fixed by the Louisiana Insurance Rating Commission, an agency of the state, and has general application.3 The insurance protection in the policy is adequate consideration to a housing authority for the premium.
*563Clause two: “ * * * nor shall the State, nor any political corporation, purchase or subscribe to the capital stock or stock of any corporation or association whatever, or for any private enterprise.
This clause prohibits the state or any of its political corporations from purchasing or subscribing to the stock of any corporation, association, or private enterprise. No basis is found here for striking with unconstitutionality a statute authorizing the purchase of insurance from a mutual company. Such a company has no stock. Although it confers membership in the company, the insurance policy is not stock. Nor does the Housing Authority become a stockholder.4
In essence, it simply purchases insurance.
To support the view that a policyholder of a mutual company is a stockholder, the respondents rely upon Wermuth v. Minden Lumber Co., 129 La. 912, 57 So. 170 and Union Mutual Fire Ins. Co. of Cincinnati v. Standard Guano & Chemical Mfg. Co., 7 Orleans App. 485. In the Wermuth case I find no holding that a policyholder of a mutual insurance company is a stockholder. The Union Mutual Fire Ins. Co. case was a suit to collect assessments against the defendant under a policy made assessable by the laws of Ohio under which the mutual company was incorporated. In disposing of an exception of no cause of action, the question was whether the Ohio law was applicable. Although reference is made to-“a member or stockholder”, I do not construe this Court of Appeal decision as holding that a member of a mutual company and a stockholder are identical. Nor was the question squarely presented.
Clause three: “Nor shall the State, nor any political corporation thereof, assume the liabilities of any political, municipal, parochial, private or other corporation or association whatsoever, except as otherwise provided in this Constitution * *
Inasmuch as the policy here is non-assessable, the purchase of such a policy is not an assumption of the liabilities of a private corporation as contemplated by this clause. The purchaser of a non-assessable insurance contract simply purchases insurance protection for an agreed period at a fixed premium, and has no obligation to-make any additional payment.
Clause four: “ * * * nor shall the State undertake to carry on the business-of any such corporation or association, or become a part owner therein * *
This prohibition is not relied upon in the majority opinion. Nonetheless, I must *565frankly state that, in my opinion, the district court was correct in concluding that it applied only to the state. The district court stated:
“I note the last, or fourth prohibition, in Article 4, of Section 12, is directed at the State to the effect that it shall not undertake to carry on the business of any such corporation, or association, or become a part owner therein. In other words, the provision is limited to the State alone, while the other prohibitions are directed at the State or any political corporation.”
In Stokes v. Harrison, 238 La. 343, 115 So.2d 373, 379 this Court quoted with approval the language of the Court of Appeal in reference to this and other sections :
“ ‘A comparison of the language of Sections 2, 12 and 13 of this Article IV of the Constitution in this particular leaves it crystal clear that where the framers intended that the restriction or limitation should apply to the State only as a separate entity from its political subdivision, the word State alone was used, but where the limitation or restriction was intended to apply to the State and to all political subdivisions thereof, the intent was so spelled out in terms of “the State, or any political corporation thereof.” * * * ’ ”
In an earlier case, New Orleans v. Graihle, 9 La.Ann. 561, this Court was presented with the question of whether a provision of the 1845 Constitution prohibiting the “State” from purchasing stock in a private corporation applied to a municipal corporation. In holding that it did not, the Court ruled :
“As the Constitution speaks of the State, which is a distinct corporate body, and of other corporate political bodies to be created, and the inhibition is applied to the former and not to the latter, it would be the exercise of arbitrary power in us thus to extend this Article of the Constitution, by construction, beyond its letter.”
The conclusion that the purchase of an insurance policy in a mutual company is an “investment” is not, as I view it, a proper evaluation of the essential nature of the transaction. The payment for the insurance is not an assessment but a premium. No part of it pays for the membership in the company. As previously noted, the premium rates are fixed by a state agency and uniformly apply to all insurance companies.
There is no substantial difference between the policy of insurance issued by a capital stock company and a non-assessable policy issued by a mutual insurance company. In both instances the policyholder is purchasing a stated amount of insurance for a fixed premium. Admittedly, the premiums paid to the mutual company by its policyholders *567form the fund from which the corporation pays losses, but this is likewise true of the premiums paid to capital stock companies. To this extent all insurance is mutual in nature :
“All insurance is mutual in the sense that the premium contributed by all insureds provide the fund by which those who suffer losses are indemnified.” 5
The overwhelming weight of authority in other jurisdictions is that the purchase of a non-assessable, single-premium fire and extended coverage insurance policy from a mutual insurance company does not violate constitutional prohibitions similar to those under consideration.6 Only one Supreme Court, that of Texas, has reached a contrary result.7
Generally, the text writers align themselves with the weight of the jurisprudence and support the view that the incidental rights of membership acquired by a governmental policyholder in the purchase of insurance in a mutual company do not violate the constitutional prohibitions.8
In my opinion, there is no adequate constitutional basis to invalidate the statute.. Accordingly, it is my view that the judgment of the district court should be reinstated. I respectfully dissent.

. State ex rel. Labauve v. Michel, 121 La. 374, 46 So. 430; City of Shreveport v. Pedro, 170 La. 351, 127 So. 865; Interstate Oil Pipe Line Co. v. Guilbeau, 217 La. 160, 46 So.2d 113; Olivedell Planting Co., Inc. v. Town of Lake Providence, 217 La. 621, 47 So.2d 23; State v. Rones. 223 La. 839, 67 So.2d 99.

. State v. Board of Com’rs of Port of New Orleans, 153 La. 664, 96 So. 510; City of New Orleans v. Disabled American Yets., 223 La. 363, 65 So.2d 796; People ex rel. Gutknecht v. City of Chicago, 414 Ill. 600, 111 N.E.2d 626; Clovis v. Southwestern Public Service Co., 49 N.M. 270, 161 P.2d 878, 161 A.L.R. 504; Bernstein v. City of Pittsburg, 366 Pa. 200, 77 A.2d 452. See also Rhyne, Municipal Law (1957), Sec. 15-3, p. 343.

. See LSA-R.S. 22:1401-1405, 1421.

. Hill v. Nautilus Insurance Company (N.Y.), 4 Sanford Ch. 577; Ross v. Knapp, Stout & Co., 77 III.App. 424; Miller v. Johnson, 4 Cal.2d 265, 48 P.2d 956; Louisville Board of Ins. Agents v. Jefferson County Board of Ed., 309 S.W.2d 40; Lawrence v. Schellstede, 348 P.2d 1078.

. Couch, Cyclopedia of Insurance Law (2nd Ed.) Vol. 1, § 179 (1959).

. Arizona, State v. Northwestern Mutual Life Ins. Co., 86 Ariz. 50, 340 P.2d 200; Arkansas, Clifton v. School District No. 14 of Russellville, 192 Ark. 140, 90 S.W.2d 508 (1936); California, Miller v. Johnson County Auditor, 4 Cal.2d 265, 48 P.2d 956 (1935); Kentucky, Louisville Board of Insurance Agents v. Jefferson County Board of Education, 309 S.W.2d 40 (1958); Montana, McMahon v. Cooney, 95 Mont. 138, 25 P.2d 131 (1933); New Jersey, French v. Mayor of City of Millville, 66 N.J.L. 392, 49 A. 465 (1901); North Carolina, Fuller v. Lockhart, 209 N.C. 61, 182 S.E. 733 (1935); Oklahoma, Huffman v. Schellstede, 348 P.2d 1078 (Okl.S.Ct.1960); Oregon. Johnson v. School District No. 1, of Multnomah County, 128 Or. 9, 270 P. 764 (1928); Pennsylvania, Downing v. School District of the City of Erie, 297 Pa. 474, 147 A. 239 (1929); Wyoming, Burton v. School District No. 19, 47 Wyo. 462, 38 P.2d 610 (1934).

. See Lewis v. Independent Schol Dist. of City of Austin, 139 Tex. 83, 161 S.W. 2d 450.

. I Cooley, Constitutional Limitations, p. 469; McQuillan on Municipal Corporations (3rd Ed.) Vol. 15, Sect. 39.30, p. 94; Rhyne, Municipal Law (1957), Sect. 15-3, p. 342; 152 A.L.R. 495, 513.