I cannot agree with the views expressed in the majority opinion. I therefore respectfully dissent, and I express my reasons therefore as follows:
As shown in the majority opinion, National Indemnity Underwriters of America (NIU) was organized as an inter-insurance exchange under the provisions of Articles 5024 to 4033, Revised Statutes of 1925. The above statutes authorized individuals, partnerships, and corporations, designated as subscribers, to exchange reciprocal or inter-insurance contracts with each other. The statutes required the subscribers to appoint an attorney in fact for them to execute such insurance contracts, and Article 5026 required the attorney in fact to file with the Insurance Commissioner a copy of the contract or agreement under and by which such insurance was to be affected or exchanged, and a copy of the form of the power of attorney or authority of such attorney under which such insurance was to be affected. The statutes did not undertake to fix the extent of the liability of any one subscriber to the others for losses ustained under the policies issued by NIU. It seems to have been contemplated that each subscriber would fix the extent of his liability to other subscribers in the power of attorney filed by him. At any rate, this practice was followed. Most, if not all, of the powers of attorney fixed the extent of liability of the subscriber at the equivalent of one additional premium on each policy taken out by the subscriber. Workmen's compensation insurance was the principal business engaged in by the company, although it also wrote automobile liability, fidelity bond, and other insurance. Petitioners and some 3200 others became members by accepting policies in the company and executing powers of attorney by which each appointed Verschoyle attorney in fact to act in the name of such subscriber. NIU and Verschoyle both became insolvent, and one Norris was appointed Receiver to liquidate the business. Norris was succeeded by Keith Kelly as Receiver, and later Kelly was succeeded by Herbert Marshall.
On June 29, 1940, the court entered an order in the receivership proceeding, in which it was found that the NIU owned unsatisfied debts in excess of $400,000.00, and that it would be *Page 514 necessary for the Receiver to collect an assessment from each policyholder who held a policy in the defunct concern during the insolvency period, which was from September 30, 1936, to December 28, 1937, and instructing the Receiver to file suit to collect such assessment, "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 as Receiver for Verschoyle, filed a purported class action in cause No. 63621 against 28 named defendants "and all other subscribers and policyholders" of NIU during its insolvency. The petition alleged that each subscriber at the time of receiving a policy had executed a power of attorney, setting out the liability of such subscriber; and that each subscriber by virtue of the application, agreement, and power of attorney became bound severally, but not jointly, for his pro rata portion of the indemnity granted under the policies issued by the association, not to exceed one additional annual premium on the policy issued to him. A copy of the power of attorney was attached to and made a part of the petition. The power of attorney provided in part as follows: "Provided, however, that said attorney (in fact) shall not have power to bind jointly subscribers, but he shall have power only to bind severally each subscriber." The petition further alleged that the amount of one additional premium from each subscriber would be necessary to discharge the obligations of the said subscribers for the losses, claims, and expenses incurred.
Petitioners were not named as defendants, and, of course, were not notified of the pendency of the suit, but Kelly alleged that the parties were too numerous to be joined as defendants in a single action, and his prayer was that the 28 named 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, and establishing the right of said Receiver to collect from each of said subscribers an amount equal to one annual premium on the policy carried by such subscriber during said period.
On March 8, 1941, upon the trial of cause No. 63621 the court found that each of the 3200 subscribers of NIU had bound himselfseverally, but not jointly, to the extent of one additional premium on each policy taken out by him for his pro rata or proportionate part of the losses sustained by the other subscribers under the hazards described in the policies issued to the other *Page 515 subscribers. It was further found that an assessment of the equivalent of one additional premium against each subscriber was necessary in order to meet the liabilities of the defunct concern. Accordingly judgment was entered against such subscriber of NIU during the insolvency period, whether named in the judgment or not, "in favor of plaintiff for such assessment herein determined and adjudicated to be due, which sum is here fixed as the final liability for assessment against each such defendant Subscriber, whether named herein or represented as a class," and that the assessment so levied "shall not be subject to any offsets for claims and demands, real or asserted, but that such liability shall be only satisfied by payment thereof in full to the plaintiff herein." The judgment further provided as follows: "It is further ordered, adjudged and decreed by the Court that the liabilities decreed herein shall be several as to each of such Subscribers during the period of time from September 30, 1936, to December 28, 1937, inclusive, and not joint." (Italics mine.)
On May 16, 1941, Sid W. Richardson and Richardson Oils, Inc., filed this bill of review, seeking to set aside said judgment of the court in Cause No. 63621 on the ground that they had no notice of said proceedings, and that the judgment entered therein was illegal. Shortly thereafter the other petitioners herein intervened.
It will be noted that none of the petitioners now before this Court were named as defendants in the suit which they seek to set aside, and, of course, they were not served with citations therein, yet it was attempted by said judgment to adjudicate their liability for the assessment sought to be imposed upon them by the Receiver.
It is a cardinal principle of our jurisprudence that no person shall be concluded by a judgment of a court either in respect to his person or property in any litigation in which he is not designated as a party or to which he has not been made a party by service of process or appearance. Hansberry v. Lee, 311 U.S. 32, 61 S. Ct. 115, 85 L. Ed. 22; Scott v. McNeal, 154 U.S. 34, 46, 14 S. Ct. 1108, 38 Lans. Ch. 5d. 896; Dunlap v. Southerlin, 63 Tex. 38, 42 1 Freeman on Judgments, 200; Vogt v. Bexar County, 5 Texas Civ. App. 272[5 Tex. Civ. App. 272],23 S.W. 1044 (writ refused); 33 Tex. Jur. 798; 9 Tex. Jur. 575; 25 Tex. Jur. 472.
To this general rule there is an exception which permits a court under some circumstances to render a judgment in a class or representative suit, to which some members of the class are *Page 516 parties, which binds other members of the class who are not named as parties thereto. Hansberry v. Lee, 311 U.S. 32, 61 S. Ct. 115, 85 L. Ed. 22, 26; Smith v. Swormstedt, 16 How. (U.S.) 288, 14 L. Ed. 942; Supreme Council, R.A. v. Green, 237 U.S. 531, 59 L. Ed. 1089, 35 S. Ct. 724, LRA 1916A 771; Hartford L. Ins. Co. v. Ibs, 237 U.S. 662, 59 L. Ed. 1165, 35 S. Ct. 692, LRA 1916A 765; Hartford L. Ins. Co. v. Barber, 245 U.S. 146, 62 L. Ed. 208, 38 S. Ct. 54; Supreme Tribe, B.H. v. Cauble, 255 U.S. 356, 65 L. Ed. 673, 41 S. Ct. 338; cf. Christopher v. Brusselback,302 U.S. 500, 82 L. Ed. 388, 58 S. Ct. 350.
In this connection it should be observed that any rule which permits a court to foreclose the rights of one who has had no notice of the pendency of the suit, and who has not had his day in court, is a harsh one which should be applied sparingly and with caution. Hence there are very definite restrictions and limitations on the use of the class action device, and particularly with reference to the character of unity that must exist among the members of the alleged class in relation to the subject matter of the litigation, in order to authorize a judgment that is binding on the absent members.
In the outset I deem it proper to state here that even if the suit in question had been maintainable as a class action, I am of the opinion that it was not properly conducted as such. The Receiver had filed a prior suit for the same purpose, and had named 190 of the subscribers as representatives of the class. Some of those named as defendants in that suit filed pleas to the venue and otherwise contested the suit. The Receiver, upon discovering that the suit would be contested, had it dismissed, and after the furor created thereby had died down he filed the second suit, the validity of which is here under consideration. According to his own testimony he purposely avoided naming as defendants in the second suit any of those who had filed pleas to the venue in the former suit, because he could not maintain venue in Travis County as to them. Thus it will be observed that the receiver purposely avoided joining as defendants any of those who had demonstrated an intention to contest the suit. The record shows that the Receiver sought judgment against the 3200 subscribers. The second suit was brought against only 28 of them as representatives of the class. Three other subscribers intervened. Of those named as defendants in the second suit, including the three who intervened, twelve had liabilities of less than $100.00 each, eleven had liabilities of less than $200.00, three had liabilities of less than $300.00, and the claims against the other five ran from $441.00 to $801.77. On the other hand, many of those not named, if liable at all, owed sums much *Page 517 larger. For example, one unnamed defendant had a possible liability of $3,333.04, one of $3,337.28, and one of $5,922.39, and another of $16,247.91. It is thus demonstrated that the Receiver avoided suing those who had such interest as would justify a contest of the suit. During the pendency of the proceedings the Receiver dismissed as to two named defendants, one because he had died while the suit was pending, and the other because of lack of service of process. Six defendants defaulted altogether. Twenty defendants filed answers. On the day of the trial five of them, with the approval of the Receiver and the court, paid into court the small amounts due by them, and thereafter made no further defense. The record discloses that prior to the trial the Receiver discussed settlement with ten of the other defendants who had filed answers. It is not shown that settlements were agreed upon, but thereafter these ten defendants made no further contest. On the day of the trial the Receiver agreed with one defendant who was contesting the suit that if he would not further resist the suit no execution would issue against him. A similar agreement was made with the three subscribers who had intervened in the suit. One defendant with a liability of only $124.87 appeared at the trial but gave no notice of appeal. Only the three remaining defendants excepted to the judgment and gave notice of appeal. Two of them, with whom settlement agreements had been discussed prior to the trial, were settled with shortly after the judgment became final, for much less than the amount adjudged against them. The only other defendant who had excepted to the judgment had a liability of only $18.00. It is apparent that his interest would not justify the expense of preparing the transcript and prosecuting the appeal. The result was that no one prosecuted an appeal from the judgment. The Receiver had by negotiations or otherwise eliminated from the case every one who had the necessary interest and the inclination to make a vigorous defense of the suit.
As heretofore stated, any rule which permits the taking away of one's rights without notice is a harsh one, which must be applied cautiously and with absolute fairness. Good faith must prevail throughout the trial. 21 C.J. 285; 30 C.J.S. 578; Campbell v. Texas N.O.R. Co., 4 Fed. Cas. No. 2,366, page 1178, 1 Woods 368; Smith v. Williams, 116 Mass. 510; Simpson County v. Buckley,85 Miss. 713, 38 So. 104. Care must be taken to insure that those named as representatives of the class are fairly represented of the interest or right involved, so that the case may be fully and honestly tried. If this is not done the very foundation for the device fails. Smith v. Swormstedt, 16 How. 288, 14 L. Ed. 942; 30 Am. Jur. 922; Sparks v. Robinson, 115 Ky. 453, 74 S.W. 176. The facts in this case make it very clear *Page 518 that those who remained in the case as defendants after all of the manipulations above referred to did not fairly represent the interest of the absent members of the class. I cannot give my approval to a judgment obtained under circumstances such as are here involved.
But regardless of the lack of fairness reflected above, I am of the opinion that this suit was not maintainable as a class action. The class action device is not available to a plaintiff as a mere convenience to avoid a multiplicity of suits. It grows out of the necessities of the case and is to be resorted to only where all the parties are otherwise essential, but because of the large number it is impracticable to bring all of them before the court at the same time. Smith v. Swormstedt, supra; Moore's Federal Practice, vol. 2, pp. 2232, 2236. Moreover, in a "true" class action, where the judgment is binding on the absent members of the class, as distinguished from the "hybrid" or the "spurious" class action, where the judgment is binding only on those who join in the suit, the rights sought to be enforced for or against the class must be joint or common to all the members of the class. Smith v. Swormstedt, supra; Moore's Federal Practice, vol. 2, p. 2236. The representative must have an interest which is co-extensive and wholly compatible with the interest of those whom he represents. Moore's Federal Practice, vol. 2, p. 2232. Some authorities express the rule here involved by saying that the rights of the members of the alleged class must be homogeneous. The reason for this requirement is to insure that those of the class who are joined will properly protect the interest of the absent members. The rule assumes that the natural instinct for self-preservation will cause those of the class who are parties to the suit to take all proper steps to protect their own interest, and in doing so they will necessarily protect the interest of all others whose rights are joint or in common with theirs. Where the community of interest is lacking, the reason for the rule disappears and the rule becomes inapplicable.
A few cases will illustrate the character of the common or joint jural relationship which must exist in order to support a judgment in a true class action.
In Hartford Life Insurance Co. v. Ibs, 237 U.S. 662, 35 S. Ct. 692, 59 L. Ed. 1165, L.R.A. 1916A, 765 the Hartford Life Insurance Company had made larger assessments against is policyholders than was necessary to pay existing claims. Some of the policyholders brought suit on the part of all others of the class to require the company to distribute the accumulated fund on hand among the policyholders instead of retaining it for *Page 519 the payment of future claims. The Supreme Court held that this was a proper class action because the ownership of the fund thus accumulated was one of common interest to all the policyholders. The Court said:
"The fund was single, but having been made up of contributions from thousands of members their interest was common. It would have been destructive of their mutual rights in the plan of Mutual Insurance to use the Mortuary Fund in one way for claims of members residing in one State and to use it in another way as to claims of members residing in a different state. * * * For, in order that the decree should be binding upon these certificate holders who were not actually parties to the proceeding, it had to appear that Dresser and the other 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 in a court of the State where the Company was chartered and where the Mortuary Fund was kept." 237 U.S. 662, 670.
In Smith v. Swormstedt, 16 How. 288, 14 L. Ed. 942, the suit was brought by some of the members of the Methodist Episcopal Church South for themselves and as representatives of all other members against some of the members of the Methodist Episcopal Church of the United States as representatives of all other members thereof for a partition of jointly-owned property. This was held to be a proper class action because it involved property in which all the members of the class had a common interest.
In Supreme Tribe of Ben-Hur v. Cauble, 255 U.S. 356, 65 L. Ed. 673, 41 S. Ct. 338, the Supreme Court had under consideration a suit brought by 574 members of Class A of the Supreme Tribe of Ben-Hur to enjoin what was claimed to be an unlawful use of trust funds of said defendant in which all of the complainants and other members of Class A of said Supreme Tribe of Ben-Hur had a common but indivisible interest, and attacking a plan of reorganization adopted by the supreme legislative body of the society. The Court held that the subject matter of the suit included the control and disposition of the funds of the beneficial organization in which all of the members had a common interest, and was therefore the proper subject of a class action. See also Hovey v. Shepherd, 105 Tex. 237, 147 S.W. 224; City of Dallas v. Armour Co., 216 S.W. 222. It will be observed that each of the above cases involved the rights of the members of the alleged class in property owned by them in *Page 520 common. None of them involved an attempt to recover on theseveral obligations of the members of the alleged class.
On the other hand, in the case of Hansberry v. Lee,311 U.S. 32, 85 L. Ed. 22, 61 S. Ct. 115, 132 A.L.R. 741, the Supreme Court had under consideration a case in which various purchasers of lots in an addition had accepted deeds containing restrictions against sale of lots to members of the colored race. Some of the owners of lots in the addition brought suit against some of the owners of other lots as representatives of a class, and sought to cancel the restrictions as against all owners of lots in the addition. The Court held that a judgment in such a suit as a class action was not entitled to the full faith and credit provided for in the Constitution. In discussing this question the Court said:
"The restrictive agreement did not purport to create a joint obligation or liability. If valid and effective its promises were the several obligations of the signers and those claiming under them. The promises ran severally to every other signer. It is plain that in such circumstances all those alleged to be bound by the agreement would not constitute a single class in any litigation brought to enforce it." 85 L. Ed. 22, 28. (Italics mine.)
In the case of Ayres v. Carver, 17 How. 591, 15 L. Ed. 179, the complainant sought to establish an equitable title to large tracts of public lands in the State of Mississippi which had been laid off in townships, ranges, and sections. He alleged that he had offered to comply with the law providing for the entry and purchase at private sale of the land as undisposed-of public land, but was prevented from making the entries and obtaining the necessary certificates by the illegal and unwarranted acts of the register at the land office. The suit was filed against the defendants, who constituted all those who had subsequently entered and paid for separate tracts of the land, and to whom patents had been issued. Plaintiff alleged that the defendants were too numerous to be brought before the court in a single action, and asked to be permitted to prosecute suit against all of them by joining only a few. In that case the Court said:
"Without intending to express any definite opinion in this matter, we must say that it is difficult to see any interest or estate in common among these several defendants that would authorize the rights of the absent parties to be represented in the litigation by those upon whom process has been served, and who have appeared to defend the suit. Their title to the land claimed, by the complainant, is separate and independent, without anything in common, it would seem, that could have the effect to make *Page 521 a decree against one, binding upon the others, or even require them to join in the defense."
In the case of Certia v. University of Notre Dame,82 Ind. App. 542, 141 N.E. 318, 320, the suit was brought by a plaintiff who owned a lot in a cemetery, on behalf of himself and all other persons having friends and relatives buried in the cemetery, praying an injunction to prevent the burial of the dead in the walks and paths of the cemetery, and causing the removal of bodies so buried therein by the defendants. The court held that whatever right the plaintiff had in the cemetery was confined to the lot owned by him, together with the right of ingress and egress thereto; that such right of necessity belonged severally and peculiarly to the owner of the lot; and that plaintiff owned no such joint or common right with other owners of lots in the cemetery as would authorize him to maintain a class action.
In this connection it will be noted that the powers of attorney sued on in the alleged class action here under consideration provided that the parties were bound severally, and not jointly, for the equivalent of one additional premium on each policy carried by the subscriber. The prayer was for a several, and not a joint, judgment, and the judgment actually rendered was"several as to each such subscriber * *, and not joint." (Italics mine.) Therefore, regardless of what may have been the liability of the parties under the relations that actually existed among them, the suit here under consideration was on alleged several obligations, and the judgment actually recovered was several, and not joint.
The only cases I have found in which a plaintiff has been permitted to maintain a true class action against a class by bring only a part of the members thereof before the court are cases in which the purpose of the suit was to affect rights heldjointly or in common by the members of the class. I have not found any case in which a plaintiff has been permitted to recover a judgment which would either directly or indirectly impose apersonal obligation for debt upon the absent members of the class by virtue of an obligation executed by the members of the class. Certainly no case can be found in which a plaintiff has been permitted to recover a judgment against the absent members of a class on several obligations executed by the members of the alleged class.
The purpose of this suit was to impose a personal liability on the members of the class for the debts of the defunct concern. *Page 522 While the judgment did not determine the final liability of the subscribers for their share of the debts, it did constitute an adjudication of some of the essential elements leading to the ultimate liability therefor. It was therefore an action inpersonam in which jurisdiction over the person of the absent members of the class was essential to the validity of the judgment. Christopher v. Brusselback, 302 U.S. 500, 82 L. Ed. 388, 58 S. Ct. 350; Old Wayne Mutual L. Assn. v. McDonough,204 U.S. 8, 51 L. Ed. 345, 27 S. Ct. 236; Pennoyer v. Neff,95 U.S. 715, 24 L. Ed. 565; Hansberry v. Lee, 311 U.S. 32, 85 L. Ed. 22, 61 S. Ct. 115.
It is argued that the suit could be maintained by the Receiver against some of the subscribers as representatives of the others for the purpose of establishing the necessity for and fixing the amount of an assessment against them, much in the same way as a Receiver of a corporation is sometimes permitted to fix an assessment against the stockholders of a corporation. It is true that where an assessment against the stockholders of a corporation is payable upon call of the Board of Directors, the stockholders are bound by the action of the Board in making such a call, and under like conditions they are bound by a valid decree of a court against the corporation made in their absence, directing the corporation to make the call for the assessment. Hawkins v. Glenn, 131 U.S. 319, 329, 33 L. Ed. 184, 191, 9 S. Ct. 739; Great Western Teleg. Co. v. Purdy, 162 U.S. 329, 336, 40 L. Ed. 986, 990, 16 S. Ct. 810; cf. Kerrison v. Stewart,93 U.S. 155, 23 L. Ed. 843. Similarly, where a statute provides some sort of reasonable procedure in lieu of personal service by which the shareholders may be brought before the court for the purpose of determining the need for an assessment and the amount thereof, the stockholders are bound by such procedure by virtue of their membership in the corporation. Bernheimer v. Converse,206 U.S. 516, 51 L. Ed. 1163, 27 S. Ct. 755; Converse v. Hamilton,224 U.S. 243, 56 L. Ed. 749, 32 S. Ct. 415, Ann. Cas. 1913d 1292; Selig v. Hamilton, 234 U.S. 652, 58 L. Ed. 1518, 34 S. Ct. 926, Ann. Cas. 1917A, 104; Marin v. Augedahl, 247 U.S. 142, 62 L. Ed. 1038, 38 S. Ct. 452; Chandler v. Peketz, 297 U.S. 609, 80 L. Ed. 881, 56 S. Ct. 602. But where there is no statute authorizing such procedure, and the directors of the corporation are not authorized to fix the assessment, each stockholder must be a party to the suit and have notice thereof in order to authorize a judgment making such an assessment. Christopher v. Brusselback, 302 U.S. 500, 58 S. Ct. 350, 82 L. Ed. 388.
The holding in the majority opinion is in direct conflict with *Page 523 the holding of the Supreme Court of the United States in the case of Christopher v. Brusselback, supra. That case involved facts almost identical with those here involved. There the creditors of a joint stock land bank brought a class action in the state court of Illinois against some of the shareholders of the bank as representatives of the others, and obtained a judgment fixing an assessment against all of the shareholders of the bank for their proportionate share of its indebtedness. Suit was then brought on the Illinois judgment in the federal court in Ohio against shareholders of the bank to collect the amount of the assessment. The Circuit Court of Appeals held that the judgment in the class action in Illinois was binding on all of the members of the alleged class regardless of whether they were actually before the court in the class action. Brusselback v. Arnovitz,87 F.2d 761. However, when the case reached the Supreme Court of the United States the judgment was reversed and the judgment in the alleged class action was held invalid. The applicable statute provided that "Shareholders of every joint-stock land bank organized under this act shall be held individually responsible, equally and ratably, 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." The Supreme Court after pointing out that it had previously held in Wheeler v. Greene, 280 U.S. 49, 74 L. Ed. 160, 50 S. Ct. 21, that there was no provision in the Federal Farm Loan Act which authorized the Federal Farm Loan Board to levy an assessment on the stockholders, and no special procedure had been provided by which the corporation could be brought before the court for the purpose of fixing an assessment against the shareholders for the debts of the corporation, said:
"The only means of enforcing the liability left to creditors of a Joint Stock Land Bank, as the Court pointed out in the Wheeler Case, is an adversary suit in equity against the stockholders wherever they may be found.
"The obligation which the statute imposes upon the stockholders is personal, and petitioners can be held to respond to it only by a suit maintained in a court having jurisdiction to render a judgment against them in personam. As the liability of the stockholders is to pay the debts of the bank to creditors `equally and ratably,' judicial determination of the inability of the bank to pay its debts and the amount to be assessed against the stockholders to meet the deficiency are prerequisite to the enforcement of liability, and are essential parts of the only cause of action which the statute gives to the creditors. It is *Page 524 plain that in such a suit the existence and extent of insolvency are facts, the allegation and proof of which cannot be dispensed with as to any stockholder unless, as between the parties to the suit, they are matters already adjudicated."
* * * * * * *
"The statutes have fixed only the conditions on which liability of the shareholders is to attach, leaving to creditors as their only recourse the usual procedure of courts as the means of asserting the liability. There is nothing in the statute relating to the organization of Federal Land Banks and the imposition of the stockholders' liability to suggest that by virtue of their membership in the corporation the stockholders can be said to have subjected themselves to a procedure for determining in their absence the essential conditions of liability, or to have relinquished their right to contest, as in any other litigation, every step essential to its establishment. As we cannot say that petitioners' membership in the bank was conditioned upon their surrender of the benefits of a procedure which would otherwise be required, there is no basis for a court to dispense with it more than in other cases in which a personal judgment is sought."
* * * * * * *
"In the circumstances the decree in the Illinois suit was not res adjudicata as to petitioners in any respect." Christopher v. Brusselback, 302 U.S. 500, 82 L. Ed. 388, 58 S. Ct. 350. See also Partridge v. Martin, 102 F.2d 284; Holmberg v. Christopher, 110 F.2d 729; Miller v. Barnwell Bros., Inc.,137 F.2d 257; and Russell v. Todd, 309 U.S. 280, 84 L. Ed. 754, 60 S. Ct. 527.
There was no provision in the Act under which NIU operated which conferred upon any one the power to levy an assessment against the subscribers, nor was there any statutory provision which authorized a Receiver of such a concern to recover a judgment for an assessment without service of process on each subscriber attempted to be held liable therefor. Article 5027, Revised Statutes, provided for service of process on the Commissioner of Insurance in certain cases in lieu of service on the subscribers, but it is not contended that the provisions thereof, if applicable, were complied with.
A judgment against parties who were not named as defendants in the suit and who had no notice thereof and who were not adequately represented therein, as shown by the record in this case, is contrary to the fundamental principles of our *Page 525 jurisprudence. It violates the due process clause of our Federal Constitution. 16 C.J.S. 1246, 12 Am. Jur. 288; Christopher v. Brusselback, supra; Wilson v. Siligman, 144 U.S. 41, 12 S. Ct. 541, 36 L. Ed. 388; Browning v. Hooper, 269 U.S. 396, 46 S. Ct. 141, 70 L. Ed. 330; Old Wayne Mutual L. Assn. v. McDonough,204 U.S. 8, 51 L. Ed. 345, 27 S. Ct. 236.
From what has been said it is apparent that the judgment in the class action was invalid. The invalidity of the judgment is apparent from the face of the record, and the judgment is therefore void.
There is another reason for holding the judgment in the class action invalid. It was alleged, in substance, that under the arrangements by which the insurance business was carried on, each subscriber became an insured upon receipt of a policy in the association and at the same time an insurer to the amount pledged in the power of attorney signed by him. The petition in the class action implies that some of the indebtedness owing by the insolvent concern is due to subscribers on policies held by them in said concern. It is apparent, therefore, that those subscribers who had suffered losses, and who had not been paid, were interested in enforcing the assessments attempted to be levied by the Receiver in the alleged class action, in order that the Receiver might obtain the funds with which to pay their claims; whereas, those who had no such unsatisfied claims were interested in defeating the assessments. In fact, the decree in the alleged class action makes it clear that the recovery sought against the class was for the benefit of some of those named as defendants therein and who were supposed to defend the suit as representatives of those not named therein. The decree read in part as follows: "It is further ordered, adjudged and decreed that the judgment rendered herein for the recovery of a fund to be paid by each subscriber at National Indemnity Underwriters of America during said period of time involves the control and disposition of a fund beneficial to the whole class ofsubscribers at National Indemnity Underwriters of America as wellas those who are named parties defendant herein." (Italics mine.) In other words, according to the recitation in the judgment in the class action, those named as defendants in that suit to represent the absent members of the class were not interested in defeating the Receiver's suit, but it was to their interest for the Receiver to recover. In view of the above it cannot be said that the interest of those named as defendants was adverse to the claim of the Receiver, nor that their interest was the same as that of the absent members of the class whom they were supposed to represent. *Page 526
In the case of Hansberry v. Lee, 311 U.S. 32, 61 S. Ct. 115, 85 L. Ed. 22, where various parties owned lots in a restricted addition and some of them brought a class action against a few of the others as representatives of all those who owned lots in the addition to cancel the restriction, the court in holding that those sued were not necessarily representative of the others said:
"It is one thing to say that some members of a class may represent other members in a litigation where the sole and common interest of the class in the litigation is either to assert a common right or to challenge an asserted obligation. Smith v. Swormstedt, 16 How. (U.S.) 288, 14 L. Ed. 942, supra; Supreme Tribe, B.H. v. Cauble, 255 U.S. 356, 65 L. Ed. 673, 41 S. Ct. 338, supra; Groves v. Farmers State Bank, 368 Ill. 35,12 N.E.2d 618. It is quite another thing to hold that all those who are free alternatively either to assert rights or to challenge them are of a single class, so that any group merely because it is of the class so constituted, may be deemed adequately to represent any others of the class in litigating their interests in either alternative. Such a selection of representatives for purposes of litigation, whose substantial interests are not necessarily or even probably the same as those whom they are deemed to represent, does not afford that protection to absent parties which due process requires.
See also Certia v. University of Notre Dame, supra; 30 C.J.S. 579; 30 Am. Jur. 922; Beecher v. Foster, 51 W. Va. 647,42 S.E. 647; Lowe v. Taylor, 222 Ky. 846, 2 S.W.2d 1042; Fisher v. Porter, 263 Ky. 372, 92 S.W.2d 368.
Since some members of the alleged class were interested in having the assessment paid, while others were interested in opposing the payment thereof, it cannot be said that all of the 3200 subscribers belong to the same class within the meaning of the rule. In my opinion there was not such unity of interest among the 3200 subscribers as would authorize the maintenance of a class action against some of them as representatives of the others.
The majority opinion relies entirely on the case of Southern Ornamental Iron Works v. Morrow, 101 S.W.2d 336, in which the Court of Civil Appeals sustained a judgment in a class action in some respects similar to the facts here involved, and in which this Court refused a writ of error. There are several good reasons, however, for not following that decision in this case. *Page 527
1. There was no showing in the Morrow case, such as was made in the case before us, that the plaintiff had eliminated all defendants who had sufficient interest and who had shown an inclination to contest the suit.
2. In the Morrow case there was no showing that those named as representatives of the class would be benefited by a recovery by the Receiver. There was an allegation to that effect, but it was not supported by proof. Here the judgment in the class action expressly recited that the fund recovered by the Receiver would be "beneficial to those who are named parties defendant herein." What better proof could be produced to show that the named defendants were interested in the recovery than the express recitations of the judgment under attack? How could those named as defendants who were interested in having the Receiver recover adequately represent the absent members of the class who were opposed to such recovery?
3. The judgment in the Morrow case was rendered prior to the rendition of the decision in the case of Christopher v. Brusselback, 302 U.S. 500, 82 L. Ed. 388, 58 S. Ct. 350, in which the Supreme Court of the United States held that a judgment rendered under such circumstances was void for lack of due process of law. The opinion in the Morrow case, as well as in the case at bar, is in direct conflict with the holding of the Supreme Court in Christopher v. Brusselback, supra.
4. The decision in the Morrow case occurred prior to the decision of the United States Supreme Court in Hansberry v. Lee,311 U.S. 32, 82 L. Ed. 22, 132 A.L.R. 741 in which that court held that recovery could not be had in a class action on the several obligations of the members of the alleged class.
5. I have carefully examined the application for writ of error in the Morrow case, and I am of the opinion that it did not squarely present the points here involved. In that case the petitioner presented only the broad contention that in no case could a judgment be rendered against any defendant without service of citation on such defendant. He did not undertake to present the distinction between cases in which a class action may be maintained and those in which an action will not lie. In my opinion the Supreme Court did not have the question squarely before it in that case.
As previously stated, it is apparent from the face of the record that the judgment in the class action was void. Where it appears on the face of the record that a judgment is void, as in this instance, the judgment may be set aside without the *Page 528 necessity of showing a meritorious defense, Kern Barber Supply Co. v. Freeze, 96 Tex. 513, 74 S.W. 303; Empire Gas Fuel Co. v. Noble (Com. App.), 36 S.W.2d 451; 25 Tex. Jur. 633.
In my opinion the judgments of the trial court and Court of Civil Appeals, sustaining the validity of the judgment in the class action, should be reversed.
Opinion delivered December 29, 1945.
Associate Justice Sharp concurring.