Lee v. Mutual Protective Ass'n of Texas

• Citation: 47 S.W.2d 402
• Decision Date: 29 January 1932
• Docket Number: No. 943.,943.
• Parties: LEE v. MUTUAL PROTECTIVE ASS'N OF TEXAS.<SMALL><SUP>*</SUP></SMALL>
• Court: Court of Appeals of Texas

47 S.W.2d 402

LEE v. MUTUAL PROTECTIVE ASS'N OF TEXAS.^*

No. 943.

Court of Civil Appeals of Texas. Eastland.

January 29, 1932.

Rehearing Denied March 4, 1932.

Appeal from District Court, Palo Pinto County; W. P. Smith, Special Judge.

Action by N. P. Lee against the Mutual Protective Association of Texas. From judgment for defendant, plaintiff appeals.

Reversed and rendered.

Bouldin & Zivley, of Mineral Wells, for appellant.

G. R. Lipscomb, of Fort Worth, and J. T. Ranspot, of Mineral Wells, for appellee.

FUNDERBURK, J.

N. P. Lee, son of Mrs. Adline Lee, had certain negotiations with R. W. Bradford, a soliciting agent for Mutual Protective Association of Texas, hereinafter called the association, relative to his mother becoming a member of the association and thereby having the benefit of the life insurance provided for members. Bradford had authority to sell insurance for said association, to take applications therefor, and send same to the association for approval. On December 13, 1930, he prepared an application for said Mrs. Adline Lee upon a blank form provided for such purpose, in which one question was: "Are you in good health as far as you know and believe?" After N. P. Lee had informed the agent, in answer to that question, that his mother was not in good health, and that she was in bed part of the time, said agent wrote as the answer to the question: "In bed part of the time." The application named N. P. Lee as beneficiary. It was unsigned. The day it was prepared it was transmitted by mail to the association. Before it was transmitted, however, the above answer was erased and the word "Yes" written instead—a change of which N. P. Lee knew nothing. A certificate dated December 29, 1930, and based upon the application, was issued, delivered to, and accepted by, Mrs. Lee within the next two or three days thereafter. The certificate contained provisions as follows:

"This membership certificate is based upon the application of said member, which application is filed in the branch office of this association, and same, together with the constitution and by-laws of this association, is made a part hereof. * * *

"It is agreed that the above named beneficiary shall not be entitled to any sum hereunder unless said member * * * has not untruthfully answered any questions or made any untruthful statements in the application upon the faith of which this certificate is issued, said statements in said application being expressly made a part hereof. * * *

"This association shall not be liable for any claim under the terms of this certificate unless the certificate actually shall have been delivered to the herein named member while said member is alive and in good health."

Mrs. Lee was not in good health when the certificate was delivered, and she died about the 18th day of January, 1931.

N. P. Lee brought this suit to recover upon the certificate. The association defended on the ground (to name only the one sustained by the court) that, by reason of the provision of the certificate last quoted and the fact that Mrs. Lee was not in good health when the certificate was delivered, it was not liable. The plaintiff pleaded waiver and estoppel, based upon alleged knowledge of the association that Mrs. Lee was not in good health, the delivery of the policy with such knowledge, and the collection of the dues therefor. Upon a nonjury trial the court gave judgment for the association. Conclusions of fact and law upon which the judgment was based were filed. One conclusion of fact was as follows: "The court finds that the defendant company, through its agent, R. W. Bradford, knew at the time the application was made and filed, that Mrs. Adline Lee was in bad health and in bed a part of the time. The court finds that, at the time the application for insurance was made, and at the time the certificate was delivered to the said Mrs. Adline Lee, that she was not in good health and that the company had no knowledge of her health at the time said policy was delivered other than what Bradford learned when he took said application."

The plaintiff has appealed.

The above-quoted finding is ambiguous. By interpreting it most favorably to the judgment, it should, we think, be held to mean that the association had such knowledge and only such knowledge of the fact that Mrs. Lee was not in good health and was in bed part of the time, as was imputable to it by the knowledge of such facts acquired by Bradford in the preparation of the application.

Unless the association waived or was estopped to claim the advantage of the provision of the certificate relied upon to defeat recovery, there can be no question as to the correctness of the judgment. It is just as certain under the decisions that, if the association had knowledge of the fact that Mrs. Lee, at the time the certificate was delivered to her, was not in good health, or (what we construe to be the same thing) was in such state of health as required her to be in bed part of the time, its act in delivering the policy with such knowledge, and collecting the dues thereon, renders said provision in the certificate as against the pleas of waiver and estoppel unavailable as a defense. We need not stop to inquire whether such defense be accurately denominated a "waiver" or an "estoppel." Neither would it serve any useful purpose to speculate or theorize upon how such a rule may be harmonized, if it can, with the rule which forbids a written contract to be contradicted by proof of prior or contemporaneous negotiations or agreements. See 16 L. R. A. (N. S.) 1213, note.

In Liverpool & L. & G. Ins. Co. v. Ende, 65 Tex. 118, the Supreme Court, approved, as a rule or principle of law, a statement from May on Insurance, as follows: "To deliver a policy with full knowledge of facts upon which its validity may be disputed, and then to insist upon these facts as ground of avoidance, is to attempt a fraud. This the courts will neither aid nor presume, and when the alternative is to find this or to find that, in accordance with honesty and fair dealing, there was an intent to waive the known ground of avoidance, they will choose the latter. Such an issue is tantamount to an assertion that the policy is valid at the time of delivery, and is a waiver of the known ground of invalidity." "The insurer is estopped from setting up the breach of any condition of the policy when at the time of its issue it knew that the condition was inconsistent with the facts, and the assured has been guilty of no fraud." Id. Corpus Juris states the rule as follows: "The issuance of the policy by the company is, according to the generally accepted rule, a waiver of a known ground of invalidity, and equivalent to an assertion that the policy is valid at the time of its delivery, although the facts known to the company would, under the express terms of the agreement, render it void or voidable, at least where the acts of insured are not fraudulent or insured does not know that the agent has exceeded his authority." 32 C. J. 1343.

As supporting the principle stated in the text, see: Continental Ins. Co. v. Cummings et al., 98 Tex. 115, 81 S. W. 705; Wagner & Chabot v. Westchester Fire Ins. Co., 92 Tex. 549, 50 S. W. 569; Aetna Ins. Co. v. Holcomb, 89 Tex. 404, 34 S. W. 915; Crescent Ins. Co. v. Camp, 71 Tex. 503, 9 S. W. 473; Camden Fire Ins. Ass'n v. Sutherland (Tex. Com. App.) 284 S. W. 927; National Fire Ins. Co. v. Carter et al. (Tex. Com. App.) 257 S W. 531; St. Paul Fire & Marine Ins. Co. v. Kitchen (Tex. Com. App.) 271 S. W. 893. Southern Underwriters v. Jones (Tex. Civ. App.) 13 S.W.(2d) 435 (writ refused); Law v. Texas State Mutual Fire Ins. Co. (Tex. Com. App.) 12 S.W.(2d) 539; Id. (Tex. Com. App.) 16 S.W.(2d) 277; Dossett v. Franklin Life Ins. Co. (Tex. Com. App.) 276 S. W. 1097; American Nat. Ins. Co. v. Stevens (Tex. Civ. App.) 262 S. W. 833; Liverpool & L. & G. Ins. Co. v. Lester (Tex. Civ. App.) 176 S. W. 602; Western Assur. Co. v. Hillyer-Deutsch-Jarratt Co. (Tex. Civ. App.) 167 S. W. 816; Mecca Fire Ins. Co. v. Smith (Tex. Civ. App.) 135 S. W. 688; American Cent. Ins. Co. v. Chancey, 60 Tex. Civ. App. 61, 127 S. W. 577; Fire Ass'n of Philadelphia v. La Grange, etc., Co., 50 Tex. Civ. App. 172, 109 S. W. 1134; Sun Life Ins. Co. v Phillips (Tex. Civ. App.) 70 S. W. 603; German Ins. Co. v. Everett, 18 Tex. Civ. App. 514, 46 S. W. 95; Standard Life, etc., Co. v. Davis (Tex. Civ. App.) 45 S. W. 826; Hartford Fire Ins. Co. v. Moore, 13 Tex. Civ. App. 644, 36 S. W. 146; Phœnix Ins. Co. v. Ward, 7 Tex. Civ. App. 13, 26 S. W. 763.

It is believed to be immaterial in the present inquiry whether the provision of the certificate relied on to defeat recovery be a warranty or a condition precedent. "A warranty in the law of insurance consists of a statement by insured upon the literal truth of which the validity of the contract depends." 32 C. J. 1273. "A warranty in an insurance contract is a statement made therein by the assured, which is susceptible of no construction other than that the parties mutually intended that the policy should not be binding unless such statement be literally true." Phœnix Assur. Co. v. Munger, etc., Co., 92 Tex. 297, 49 S. W. 222, 225. "A condition precedent is a condition which must be performed" or must exist "before the contract of insurance becomes a valid operative contract, although it may have been made in form, executed and delivered." 32 C. J. 1276. The same authority, however, after pointing out distinctions between a warranty and a condition precedent, further says: "A warranty, however, is a condition precedent in the sense of that term as used to indicate a condition precedent to recovery upon the contract." Id., p. 1275.

Our purpose in giving the definitions of these terms is but to make clear what is meant when we say that the principles of waiver and estoppel already discussed apply to warranties and conditions precedent. "In the absence of statutory...