ARCHER, Chief Justice.
■ This is an appeal by certain policyholders of Texas Mutual Insurance Company, hereinafter called Texas Mutual, from an order of the Fifty-Third Judicial District Court of Travis 'County, Texas, levying an assessment equivalent to one annual premium against every policyholder of Texas Mutual who had a policy in force during the period from February 14, 1952, to February 13, 1953, inclusive.
The appeal is based on nine points assigned as error by the trial court, and are to the effect that the Board’s finding that Texas Mutual had the surplus required of a company issuing nonassessable policies, and the approval of the issuance of such were conclusive of the company’s authority to do so, irrespective of whether in actual fact the surplus existed, that in any event purchasers of nonassessable policies may not be assessed if the policies were issued prior to-the time Texas Mutual, a Court, the Board or some other regulatory body determined that the surplus required by V.A. T.S. Insurance Code, Article 15.11 did not exist, that if the Liquidator had the right to set aside the Board’s erroneous finding that Texas Mutual had such surplus, appellants have the right to set aside the finding of the Board that Texas Mutual had the cash surplus required and its erroneous action in issuing to such company a certificate to engage in business renders void, as between appellants and the company, the policies issued appellants, and prohibits any assessment against appellants, that since Texas Mutual represented that the policies purchased by appellants were nonassessable the company is estopped to levy an assessment and likewise the Liquidator, that no-assessment may be levied for the purpose of paying claims that arose prior to the time appellants became policyholders, that if Article 15.11 be interpreted as authorizing such a decree then such article is unreasonable, and violates the Constitution, of both the State of Texas and the United States, that it was error to assess policyholders whose policies were in force at any time during the period from February 14, 1952, to February 13, 1953, inclusive, because Article 15.11 provides that “no member shall be liable for any part of such contingent premium in excess of the amount demanded within one year after the termination of the policy”, and because no demand has been or will be made upon many of the [746]*746policyholders within such period, and finally in decreeing an assessment against one group of policyholders for the purpose of paying claims of another group of policyholders, irrespective of the position of third party creditors, and as between themselves may defend any claim for assessment upon the ground of fraud.
Texas Mutual was organized May 17, 1949, and authorized to receive applications for insurance, etc., but not to issue policies, and given six months in which to comply with Chapter 9, Title 78, R.C.S., Texas,
The Board of Insurance Commissioners on July 11, 1949, issued its certificate that
“This Is To Certify That Texas Mutual Insurance Company Beaumont, Texas
has, according to- sworn statement, complied with all requirements of law applicable thereto and is hereby authorized to pursue the business of
Fire; Lightning; Explosion; Extended Coverage; Windstorm; Tornado; Hail; Auto — Fire, Theft, Collision and Comprehensive
insurance within this State for year ending May 31, 1950, in accordance with provisions of Chapter 9, Title 78, R.C.S., Texas, 1925.
In Witness Whereof, I hereunto sign my name and affix my official seal at Austin, Texas, this 11th day of July, 1949. s/ George B. Butler Chairman of Board”
The official minutes of the Board dated July 11,1949, reads as follows:
“Official Minute of Meeting Board of Insurance Commissioners Austin, Texas
Date July 11, 1949
Members present: Voted
■George B. Butler - Life Insurance Commissioner, Chairman
Paul H. Brown - Fire Insurance Commissioner
J. P. Gibbs -
Casualty Insurance Commissioner Subject Considered:
Qualification of a Chapter 9 Company
General remarks and action taken:
“The Texas Mutual Insurance Company, Beaumont, Texas, was granted a temporary permit in accordance with the provisions of Chapter 9, Title 78, R.C.S., Texas, 1925.
“The company has furnished this Department with sufficient evidence to entitle it to receive a certificate of authority to transact the business of a mutual fire insurance company in this State, and it is ordered, therefore, that ' such license be issued to the above company for the year ending May 31, 1950.
“The above application for license has been approved by L. W. Blanchard, Chief Examiner.
“s/ George B.’Butler
“George B. Butler, Chairman
“s/ Paul H. Brown
“Paul H. Brown, Fire Insurance Commissioner
“s/ J. P. Gibbs
“J. P. Gibbs, Casualty Insurance- Commissioner.”
The affidavit appears to have been untrue, and that the $20,000 had been borrowed from an individual on July 9, 1949, and a note payable on demand executed. [747]*747The entire amount of $20,000 was withdrawn on July 16, 1949, and never replaced as a cash surplus.
On August 5, 1949, David E. O’Fiel and Emmett E. Langham, for a recited consideration of $10 in cash and other good and valuable considerations, conveyed to the Texas Mutual certain real property in Beaumont, Texas. On August 5, 1949, Texas Mutual executed an instrument in the nature .of a deed of trust to secure the payment of an outstanding note secured by a lien on the property herein involved in the sum of .$40,023.10 and also to secure the payment of a note payable to David E. O’Fiel et al. in 'the principal amount of $59,976.90.
On the 8th day of August, 1949, Texas Mutual Insurance Company acknowledged that Paul R. Lowry and Leslie D. Lowry had jointly advanced to the company the sum of $336,000 to enable the company to comply with any requirement of the law, and to be repayable, after providing for all reserves, etc. It was stated that at all times the company should maintain a free policyholders’ reserve of $200,000 in addition to all other reserves, etc.
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ARCHER, Chief Justice.
■ This is an appeal by certain policyholders of Texas Mutual Insurance Company, hereinafter called Texas Mutual, from an order of the Fifty-Third Judicial District Court of Travis 'County, Texas, levying an assessment equivalent to one annual premium against every policyholder of Texas Mutual who had a policy in force during the period from February 14, 1952, to February 13, 1953, inclusive.
The appeal is based on nine points assigned as error by the trial court, and are to the effect that the Board’s finding that Texas Mutual had the surplus required of a company issuing nonassessable policies, and the approval of the issuance of such were conclusive of the company’s authority to do so, irrespective of whether in actual fact the surplus existed, that in any event purchasers of nonassessable policies may not be assessed if the policies were issued prior to-the time Texas Mutual, a Court, the Board or some other regulatory body determined that the surplus required by V.A. T.S. Insurance Code, Article 15.11 did not exist, that if the Liquidator had the right to set aside the Board’s erroneous finding that Texas Mutual had such surplus, appellants have the right to set aside the finding of the Board that Texas Mutual had the cash surplus required and its erroneous action in issuing to such company a certificate to engage in business renders void, as between appellants and the company, the policies issued appellants, and prohibits any assessment against appellants, that since Texas Mutual represented that the policies purchased by appellants were nonassessable the company is estopped to levy an assessment and likewise the Liquidator, that no-assessment may be levied for the purpose of paying claims that arose prior to the time appellants became policyholders, that if Article 15.11 be interpreted as authorizing such a decree then such article is unreasonable, and violates the Constitution, of both the State of Texas and the United States, that it was error to assess policyholders whose policies were in force at any time during the period from February 14, 1952, to February 13, 1953, inclusive, because Article 15.11 provides that “no member shall be liable for any part of such contingent premium in excess of the amount demanded within one year after the termination of the policy”, and because no demand has been or will be made upon many of the [746]*746policyholders within such period, and finally in decreeing an assessment against one group of policyholders for the purpose of paying claims of another group of policyholders, irrespective of the position of third party creditors, and as between themselves may defend any claim for assessment upon the ground of fraud.
Texas Mutual was organized May 17, 1949, and authorized to receive applications for insurance, etc., but not to issue policies, and given six months in which to comply with Chapter 9, Title 78, R.C.S., Texas,
The Board of Insurance Commissioners on July 11, 1949, issued its certificate that
“This Is To Certify That Texas Mutual Insurance Company Beaumont, Texas
has, according to- sworn statement, complied with all requirements of law applicable thereto and is hereby authorized to pursue the business of
Fire; Lightning; Explosion; Extended Coverage; Windstorm; Tornado; Hail; Auto — Fire, Theft, Collision and Comprehensive
insurance within this State for year ending May 31, 1950, in accordance with provisions of Chapter 9, Title 78, R.C.S., Texas, 1925.
In Witness Whereof, I hereunto sign my name and affix my official seal at Austin, Texas, this 11th day of July, 1949. s/ George B. Butler Chairman of Board”
The official minutes of the Board dated July 11,1949, reads as follows:
“Official Minute of Meeting Board of Insurance Commissioners Austin, Texas
Date July 11, 1949
Members present: Voted
■George B. Butler - Life Insurance Commissioner, Chairman
Paul H. Brown - Fire Insurance Commissioner
J. P. Gibbs -
Casualty Insurance Commissioner Subject Considered:
Qualification of a Chapter 9 Company
General remarks and action taken:
“The Texas Mutual Insurance Company, Beaumont, Texas, was granted a temporary permit in accordance with the provisions of Chapter 9, Title 78, R.C.S., Texas, 1925.
“The company has furnished this Department with sufficient evidence to entitle it to receive a certificate of authority to transact the business of a mutual fire insurance company in this State, and it is ordered, therefore, that ' such license be issued to the above company for the year ending May 31, 1950.
“The above application for license has been approved by L. W. Blanchard, Chief Examiner.
“s/ George B.’Butler
“George B. Butler, Chairman
“s/ Paul H. Brown
“Paul H. Brown, Fire Insurance Commissioner
“s/ J. P. Gibbs
“J. P. Gibbs, Casualty Insurance- Commissioner.”
The affidavit appears to have been untrue, and that the $20,000 had been borrowed from an individual on July 9, 1949, and a note payable on demand executed. [747]*747The entire amount of $20,000 was withdrawn on July 16, 1949, and never replaced as a cash surplus.
On August 5, 1949, David E. O’Fiel and Emmett E. Langham, for a recited consideration of $10 in cash and other good and valuable considerations, conveyed to the Texas Mutual certain real property in Beaumont, Texas. On August 5, 1949, Texas Mutual executed an instrument in the nature .of a deed of trust to secure the payment of an outstanding note secured by a lien on the property herein involved in the sum of .$40,023.10 and also to secure the payment of a note payable to David E. O’Fiel et al. in 'the principal amount of $59,976.90.
On the 8th day of August, 1949, Texas Mutual Insurance Company acknowledged that Paul R. Lowry and Leslie D. Lowry had jointly advanced to the company the sum of $336,000 to enable the company to comply with any requirement of the law, and to be repayable, after providing for all reserves, etc. It was stated that at all times the company should maintain a free policyholders’ reserve of $200,000 in addition to all other reserves, etc.
An appraisal of the property made by three persons fixed the overall value of the property at $436,000, which together with the certificate of advanc.e, were submitted in support of the company’s request for authority to write nonassessable policies.
On August 18, 1949, the Chief Examiner for the Board wrote Texas Mutual that the appraisals of the property being deeded to it and the certificate of advance by the Lowry Brothers were acceptable to the Department.
The property was conveyed to the company direct and the Lowry Brothers never had title. The only consideration was the assumption of an outstanding indebtedness and the execution of the note above mentioned.
There is testimony that the property was in no case worth over $100,000.
On November 7, 1949, the -following letter'Was written:
“State of Texas Board of Insurance Commissioners. Life Division Austin
November 7, 1949
Mr. Paul R. Lowry, President
Texas Mutual Insurance Company
920 Pearl Street Beaumont, Texas
Dear Sir:
This will acknowledge receipt of a statement of the Texas Mutual Insurance Company made as of October 31, 1949 showing Surplus to Policyholders in the amount of $363,526.76 and a letter from Mr. H. W. Gardner, Vice President of the First National Bank of Beaumont, Texas under date of November 4, 1949, which certifies that the Texas Mutual Insurance Company had on deposit in -that 'Bank as of October 31, 1949 the sum of $36,595.97. We are returning herewith the original of this statement and letter together with a copy of each and we are retaining for our files the other copy sent by you.
The writer personally examined the deed in which you and your brother conveyed to the Texas Mutual Insurance ' Company real estate for home office' property together with the appraisal made by Beaumont real estate men on this property, and this Department has accepted the home office property at a valuation of $436,000.00 less the outstanding incumbrance, originally at $100,000.00, as a fair and reasonable valuation on the property for your company.
We hope this is the information yon desire.
Yours very truly,
George B. Butler, Chairman' Board of Insurance Commissioners
(Signed) By L. W. Blanchard! L. W. Blanchard, Chief Examiner”
[748]*748The Board issued its certificates of authority covering several periods of time, certifying that the company “ * * * has according to sworn statement, complied with ' all requirements of law * * *” the last of which is dated April 30, 1952, and covers a period ending May 31, 1953.
On April 30, 1952, the Board entered its order as follows:
“Official Minute of Meeting Board of Insurance Commissioners Austin, Texas
Date April 30, 1952
Members present: Voted
George B. Butler - Life Insurance Commissioner, Chairman
Paul H. Brown -- Fire Insurance Commissioner
Garland A. Smith - Casualty Insurance Commissioner
Subject Considered:
Renewal Certificate of Authority General remarks and action taken:
“The. annual reports of the attached list of companies have been duly examined and approved by R. R. Butler, Supervising Examiner, as- complying with the law, and the companies have done and performed all things necessary under the law to entitle them to be licensed in this State for the year ending May 31, 1953, and it is ordered, therefore, that such licenses be issued to the said companies.
“s/ George B. Butler
“George B. Butler, Chairman
“Paul H. Brown, Fire Insurance Commissioner
“s/ Garland A. Smith
“Garland A. Smith, Casualty Insurance Commissioner
Included .in list attached is Texas Mutual Insurance Company.
The policies contained on their face the following provisions:
“Mutuals — Participation Clause Without Contingent Liability
“No Contingent Liability: No policyholder in this company incurs any liability other than the Deposit Premium or Premium Paid; the company having accumulated, and now having intact, a a free surplus equal to the Capital Stock required of a domestic stock insurance company transacting the same kind of insurance. This is in accordance with the company’s By-Laws and the provisions of the Mutual Insurance Act passed by the 41st Legislature, 1929, First Called Session, Page 90, Chapter 40, Section 10.
“Mutual Participation: The insured is, by virtue of this policy a member of the company, subject to the By-Laws, reference to which is had, and shall be entitled to such unabsorbed Deposit Premium or Dividend as may be declared by the Board of Directors of Executive Committee, subject, however, to approval by the Board of Insurance Commissioners of the State of Texas before being paid.”
The policy forms had the following endorsement :
“No. AG 1220 Texas Mutual Insurance Company A Mutual Company This Policy is Nonassessable Mutual Policy Conditions
“This policy is issued by a Mutual Company having special regulations lawfully applicable to its organization, membership, policies or contracts of insurance, of which the following shall apply to and form a part of this policy:
“This policy is nonassessable. The policyholder is a member of the company and shall participate, to the extent and upon the conditions fixed and determined by the Board of Directors of the Company in accordance with the provisions of law, in the distribution of dividends so fixed and determined.”
The policies were on forms prescribed by the Commission as to terms, conditions, restrictions and liability, and required the company to file specimen copies of such policies.
[749]*749On May 25, 1950, Commissioner Gibbs wrote the following letter:
“Mr. Travis White City Attorney El Paso, Texas
Dear Mr. White:
Texas Mutual Insurance Company — Beaumont, Texas
I am sorry that it was not possible for me to give the information you requested by wire.
In checking the Company’s annual statement for the year ending December 31, 1949, we find that they have total admitted assets of $465,356.42 with total liabilities, except capital, of $99,036.42, leaving a surplus as regards policyholders of $366,320.04.
The Company having submitted evidence to this Department that it has a free surplus in excess of $200,000.-00 is, therefore, entitled to write a non-assessable policy as provided by Article 4860a-10 and the policy on file with this Department does carry the non-assessable provision.
The Company has met the requirements as set out in the law and is licensed to write all forms of automobile coverage.
I trust that this gives you the desired information.
Very truly yours,
J. P. Gibbs, Commissioner Casualty Actuary”
On September 23, 1949, Mr. L. W. Blanchard, Chief Examiner, wrote the following letter:
“To: Mr. Rustin, Fire Insurance Department
Mr. McDonald, Casualty Insurance Department
Date: September 23, 1949
From: L. W. Blanchard, Chief Examiner
“The Texas Mutual Insurance Company, 950 Pearl Street, Beaumont, Texas, organized recently under the provisions of Chapter 9, Title 78, Revised Civil Statutes of Texas, as a mutual legal reserve fire and casualty insurance company, has submitted evidence to this Department that it has a free surplus in excess of $200,000.00, and is therefore entitled to write a non-assessable policy. If you find these policies to be acceptable, please file mark one of each type and send to the Company, retaining one in your files.
“s/ L. W. Blanchard “L. W. Blanchard,
Chief Examiner”
The company filed its annual statements for the years 1949, 1950 and 1951, showing that it was writing nonassessable policies. These statements were approved by the Board in words as follows on April 4, 1950:
“Official Minute of Meeting
Board of Insurance Commissioners Austin, Texas Date April 4, 1950 Members present: Voted
George B. Butler - Life Insurance Commissioner, Chairman
Fire Insurance Commissioner •
J. P. Gibbs --' Casualty Insurance ■’ Commissioner
Subject Considered:
Renewal Certificates of Authority General remarks and action taken:
The annual reports of the following companies have been duly examined and approved by M. E. Martindale, Actuary to the Board and R. R. Butler, Supervising Examiner, as complying with the law, and the companies have done and performed all things necessary^ under the law to entitle them to be licensed in this State for the year ending May 31, 1951, and it is ordered,' therefore, that such licenses be issued to the following Companies:- *' *
Included in the list is Texas Mutual Insurance Company.
[750]*750A similar order.was made on March 8, 1951, and on April 30, 1952.
The contentions of appellants are that the Board’s findings and orders with respect to the authority of Texas Mutual to issue nonassessable policies were and are conclusive.
The appellee takes the position that the Board of Insurance 'Commissioners never made a determination that the company had a $200,000 reserve, nor did it approve the action of the company in issuing such policies.
The Insurance Code, V.A.T.S., is long and we shall not copy any more if its articles than appear essential to an understanding of this case.
Art. 1.04 prescribes the duties of the commissioners, providing for individual supervision of phases of insurance, but that the Board shall operate as a whole.
The powers and duties of the Board are set out in Art. 1.10 and provide for the execution of all laws, file articles of incorporation, calculate reserve, control of a company when its capital is impaired, publish reports of investigation, suspend or revoke certificates, report to the Attorney General and the Governor, and other States, etc.
Art. 1.11 provides for annual statements.
Art. 1.14 provides for the issuance of certificates of authority; and Art. 1.15 provides for an examination of each company under the direction of the Chairman of the Board by examiners commissioned by him, and that the Chairman may revoke or modify any certificate of authority issued by him, etc.
Expenses of examination are to be paid by the corporations examined as set out in Art. 1.16.
Art. 1.17 authorizes the Chairman of the Board to appoint examiners, one of whom shall be the Chief Examiner, all of. whom shall be under the direction of the Chairman. ■
Art. 1.19 authorizes the Chairman of the Board to require free access to all books and records for purposes of examination.
Art. 5.06 provides that the Board shall prescribe policy forms, and that no other form shall be used, except it be approved by the Board, etc.
Arts. 5.35 and 5.36 provide that the Board shall make and establish uniform policies and tfiat same shall be used, and that all endorsements placed upon insurance policies shall be subject to the approval of the Board, etc.
Art'. 15.11 is as follows;
“The policies shall provide for a premium or premium deposit payable in cash, and except as herein provided for a contingent premium at least equal to the premium or premium deposit. Such a mutual company may issue - a policy without a contingent premium while, but only while, it has a surplus equal to the capital required of a domestic stock insurance company transacting the same kinds of insurance, but any such company may issue a policy providing that the holder of any such policy shall be liable for no greater amount than the premium or premium deposit expressed in the policy. If at any time the admitted assets are less than the" unearned premium reserve, other liabilities and the required surplus, the company shall immediately collect upon policies with a contingent premium a sufficient proportionate part thereof to restore such assets, provided no member shall be liable for any part of such contingent premium in excess of the amount:demanded within one year after the termination of the policy. The Board may, by written order, direct that proceedings to restore such assets be deferred during the time fixed in such order.”
Jt was the duty of the Chairman of the. Board and the Board as a whole to have determined that. Texas Mutual had [751]*751complied with all requirements of the law as a fact before the certificates of authority were issued under the provisions of Sec. 1, Art. 1.14.
We believe that the Chairman of the Board of Insurance Commissioners as well as the Board have determined that the alleged surplus existed and that the purchasers of nonassessable policies were justified in relying on the provisions of the policies and on the several certificates of authority issued, as well as the examiner’s report, and the several reports made by the Board as hereinabove referred to.
Each policyholder was induced to become such by reason of the representation that his policy would be nonassessable, and actually the minds of such policyholders arid the agent of the company never met upon a contract under which the policyholders might be assessed.
It was the duty of the Chairman of the Board and the Board to have the company examined at such intervals as would enable a determination that the surplus actually did or did not exist.
We recognize that the organization of the company, its surpluses and its operation is clothed in questionable procedure, and that in all actual probability the company never had the free surpluses as it claimed and as it reported to the Board.
The certificate of advance and appraisal were submitted in support of the company’s request to issue nonassessable policies.
The record in the case, is long and consists of many exhibits, some pertaining to the organization, some to the certificates and others as to annual reports, and the Board’s action thereon, together with the several reports made by the. Board to the Governor and other agencies.
The testimony is that of a number of witnesses, some of whom are employees of the Commission, some of the company, as well as other individuals. As a whole the record is made up of five volumes. The oral evidence comprises over seven hundred pages, and is related to the organization, operation and conduct of the Mutual’s business and of its affairs and we see no need to embody herein such testimony.
We have been favored with excellent briefs and the questions are well presented.
As we have stated we believe that under the Insurance Code as administered by the Chairman of the Board and the examiners with the approval of the Board either by its certificates and orders or at any rate by its implied approval that the policies, carrying as they did the nonas-sessable clause, that the policyholders are not subject to an assessment. Kavanaugh v. Underwriters Life Insurance Co., Tex.Civ.App., 231 S.W.2d 753, error ref.
In making this .decision- we are not unaware of the just claims of the third party claimants or creditors as such, and that they should be paid as a- matter of moral right, but it.was the duty of the Chairman of the Board, with the aid and advice of his examiners,' and the Board as such to have more carefully examined and determined the true condition of the company at its organization and at all times during its operation, and having apparently failed to do so the policyholders are not liable for an assessment. Manhattan Life Insurance Co. v. Wilson Motor Co., Tex.Civ.App., 75 S.W.2d 721, error ref.
, In Dwinnell v. Kramer,. 87 Minn. 392, 92 N.W. 227, it was held that a policyholder is liable to assessment in accordance with his contract, and that the conditions must be stated in full. The opinion is long and we refer to it for a full recitation of the holding. Patrons’ Mutual Fire Insurance Co. v. Brinker, 236 Mich. 367, 210 N.W. 329.
In Gilley v. Missouri State Life Insurance Company, 116 Tex. 43, 285 S.W. 807, 808, the Court stated that the purpose of the Department of Insurance is of enforcing the insurance laws:
“The department of insurance is organized for the very purpose of en[752]*752forcing the insurance laws. It has no reason for existence, except to enforce the insurance laws. In doing this many duties are prescribed, but the basis of all of them is to see that the statutes of the state enacted for the protection of the people are complied with by insurance companies. It would be idle to say that under those statutes it is not the duty of the insurance commissioner to see that insurance companies issue only policies authorized and permitted by the law.”
In Denton v. Ware, Tex.Civ.App., 228 S.W.2d 867, at page 871, the Court held:
“ * * * as a prerequisite to the right to engage in the insurance business * * * the statutes requiring charters and permits must be complied with, but those statutes are for the protection of the citizens of the state who may deal with such companies.” Boucher v. Wallis, Tex.Civ.App., 236 S.W.2d 519, error ref., n.r.e.
In view of our holding that the policies are nonassessable it is not necessary for us to pass on the other points.
The judgment of the trial court insofar as it fixed liability on appellants is reversed and rendered in favor of appellants.
Reversed and rendered.
Now V.A.T.S. Insurance Code, art. 15.01 et -seq.