Merchants' Mfrs.' Lloyds' v. S. T.

It is with some reluctance that I enter my dissent from some of the conclusions reached by my Brethren, but, after mature reflection, I cannot concur in the view of majority that the trial court properly entered judgment in this case against each of the defendants cited for the full amount of the recovery. I can see no reason why the express stipulation in the contract of insurance that the personal liability of the several underwriters should not extend beyond the percentage specified should not be given full effect. The policies upon which plaintiff sued provided:

"That each of the individual underwriters hereto, as separate underwriters, each acting separately and not jointly, no one for the other, nor for any of the others, each representing by and acting through" the named attorneys in fact insured plaintiff "against all direct loss or damage by fire * * * to an amount not exceeding for each underwriter his pro rata portion or percentage as indicated by the rider attached," etc.

The rider so attached and thereby made a part of the insurance contract, shows the amount of the entire subscription to the stock of the exchange which each underwriter had made, and the percentage that each of such amounts bears to the whole, and therefore fixes and limits the individual liability for loss under the policy. While I agree with the majority in the conclusion that the judgment was properly entered against the exchange, as an association or quasi partnership, and that such judgment could be enforced against any partnership funds or property, yet I do not believe that a personal judgment against each stockholder should have been rendered for an amount in excess of the percentage specified in the policy. The fact that under title 102, c. 1, article 6126 et seq., Vernon's Sayles' Tex. Civ.Stats., provision is made for limitation upon the liability of special partners in certain kinds of business, and that the insurance business and the banking business are specially excepted from such benefits, in the opinion of the writer does not control the issues here presented. This piece of legislation evidently had a twofold purpose viz.: (1) To encourage the union of capital in commercial enterprises, without the entailing of general partnership liability as to each contributor; (2) to provide a safe means and method of notice to those dealing with such persons in the ordinary commercial transactions, as to the character and extent of the liability of the several persons interested in the business. This act provides that one or more of the partners must assume general liability. They are presumed to have the general management or control of the business, and are therefore made jointly and severally liable. But as to others, who have no control, voice, or direction in the management of the affairs of the enterprise, but merely have intrusted their funds into the hands and care of those in active management, these may limit their liability by complying with the requirements of this act. The law was passed during the first year of our existence as a state, when there were no men of large capital, when the millionaire was unknown, when capital was scarce and timid, when manufacturing, mechanical, and similar enterprises needed to be encouraged, when inducements were doubtless deemed advisable to bring into active circulation and service the limited savings of the comparatively poor, and of those who had neither time, inclination, nor training for the active management of such lines of endeavor. The probable reason for excluding banking and insurance from the benefits of this act was that the very character of these two kinds of business rendered the character of the notice provided by the act insufficient and impracticable. The bank is the medium of commercial exchange, the trustee of the community's available cash, and to require that those dealing with it in the ordinary transactions of its business must first inquire of the secretary of state as to whether there be any limitation of liability on the part of its individual stockholders, in order to be protected against a hidden reservation, would have tended to discourage rather than to encourage the free circulation and use of money. The insurance business touches the unlearned as well as the learned, the ignorant as well as the wise, the widow and the orphan as well as the experienced man of affairs, the credulous and careless as well as the cautious and skilled. Hence it was properly deemed unwise to include it in the class of enterprises to which this legislation relates. But nothing in this act, or in any other statute of our state, so far as the writer recalls, precludes a limitation of liability by special contract, when the written memorial of the contracting parties specially provides for such limitation. In this event, the parties are upon an equal footing, dealing at arm's length, and both are fully advised as to the attempted limitation. A person contracting with an insurance company or an association is not required to follow the direction indicated by the index finger of constructive notice, in order to determine whether there be any limitation of liability, but such limitation becomes a part of the written contract, its character and its extent is plainly disclosed to the layman as well as to the lawyer, the unlettered as well as the learned may contract fully informed as to the facts in this particular. The character of policy, with a limitation as to each individual underwriter to a specified amount of percentage, has been sustained by the courts of England and the United States since the time of William III and Queen Anne, when Lloyd's coffeehouse was the wonted resort of seafaring men, and those that did business with them, and there the underwriters of London congregated, having organized at this center an association among themselves, and wrote policies with a similar limitation of individual liability. See 25 Cyc. 1524; 1 Cooley's Briefs on Insurance, p. 53, 4 Cooley's Briefs, p. 3072, 14 R.C.L. 859; McAllister v. Hoadley (D.C.) 76 F. 1000; Sumner et al. v. Piza (D.C.) 91 F. 677, and authorities cited in these text-books and decisions. The writer does not think that the case of Sergeant v. Goldsmith D. G. Co., 159 S.W. 1036, cited by appellee, and in part relied on by the majority to fortify their conclusion that a personal judgment was properly rendered against each defendant for the full amount of recovery, sustains such conclusion. In the policy there under consideration it was provided that, in consideration of the payment of the premium demanded, "each member of the association in issuing the policy under the authority of their authorized attorney in fact, `do severally, each for himself or itself, and not jointly, no one being bound for any other,' agree to indemnify the member holding such policy against loss or damage by fire, etc., to the amount named in such policy." The court further says:

"This appears to be an outright unqualified obligation by every member to pay the loss. For the evident purpose, however, of limiting such apparent unqualified liability, the succeeding stipulation contains the provision that `the responsibility of each subscriber is in the same proportion of the entire loss or damage hereunder which each subscriber's deposit or deposits at the time of such loss bear to the aggregate of all deposits then in force.' By these provisions, taken from both the application and policy contract, the liability of the members is to be measured, and to the extent of such liability each is necessarily an insurer during his membership for all policy holding members during their stay in the association."

As will be noted by a careful reading of this case, the Dallas Court of Civil Appeals only held that in this suit, by the receiver of an unincorporated insurance association against one of its individual underwriters forming the association, that the individual underwriter was liable in the ratio or proportion indicated by the clause quoted, not that he was liable for the full amount of the policy. The court uses the following language:

"Accordingly we hold that each member holding a policy of insurance in the association at the time of loss under any such policy was bound individually in the ratio or proportion indicated by the clause quoted."

In the opinion of the writer, that portion of the judgment which holds each individual underwriter cited liable for the full amount of the recovery should be reformed so as to limit personal judgment rendered against each individual underwriter to the percentage of the recovery indicated in the policy itself.