Haberman v. Equitable Life Assurance Society of US, 15330.

• Decision Date: 16 September 1955
• Docket Number: No. 15330.,15330.
• Citation: 224 F.2d 401
• Parties: R. A. HABERMAN, Jr., Independent Executor of the Estate of Elizabeth H. Gravis, Deceased, Appellant, v. The EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

224 F.2d 401 (1955)

R. A. HABERMAN, Jr., Independent Executor of the Estate of Elizabeth H. Gravis, Deceased, Appellant, v. The EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, Appellee.

No. 15330.

United States Court of Appeals Fifth Circuit.

June 30, 1955.

Rehearing Denied September 16, 1955.

Frank M. Rosson, Fritz K. Knust, San Antonio, Tex., for appellant.

Garrett R. Tucker, Jr., Houston, Tex., Baker, Botts, Andrews & Shepherd, Houston, Tex., of counsel, for appellee.

Before HUTCHESON, Chief Judge, and TUTTLE and CAMERON, Circuit Judges.

Rehearing Denied September 16, 1955. See 225 F.2d 837.

TUTTLE, Circuit Judge.

This appeal is from a declaratory judgment holding that appellant, hereinafter called Haberman, is not entitled to restitution or refund of the consideration paid by his testatrix to appellee, hereinafter called Equitable, for a certain annuity policy, in excess of the payments already made to testatrix or her estate. The following statement of the facts and issues is adapted from the agreed statement made by the parties in accordance with Rule 76, Federal Rules of Civil Procedure, 28 U.S.C.A.

Haberman is a resident of San Antonio, Texas, and Equitable is a New York corporation conducting a life insurance and annuity business in Texas. On April 8, 1946, Equitable issued to Mrs. Elizabeth H. Gravis of San Antonio its Refund Annuity No. 12,142,208, for $50,000 paid by Mr. Gravis. Haberman, Mrs. Gravis' brother and financial advisor, handled, on her behalf, the negotiations for and purchase of the annuity.

At all material times, Equitable had complied with the laws of Texas relating specifically to foreign corporations engaged in the life insurance and annuity business in that State. It had obtained from the Board of Insurance Commissioners of Texas pursuant to Vernon's Texas Civil Statutes, Art. 4751 (now Art. 3.57, Tex.Ins.Code), a Certificate of Authority expressly authorizing Equitable "to transact life, health, accident and annuity insurance in the State of Texas." The agent who represented Equitable in the sale of the annuity to Mrs. Gravis had been duly licensed by the Board of Insurance Commissioners of Texas, pursuant to Art. 5068b (now 21.07, Tex.Ins.Code). Equitable had appointed the Chairman of the Board of Insurance Commissioners of Texas as its agent for service of process, as required by Art. 4763 (now Art. 3.65, Tex.Ins.Code).

Equitable had not registered the annuity as a "security" under the Texas Securities Act, Art. 600a, nor qualified under that act as a "securities dealer." Its agent had not been licensed or registered under that act as a "securities dealer" or "securities salesman." Nor had Equitable filed a power of attorney with the Secretary of State of Texas designating a resident agent for service of process under Art. 2031a.

The terms of the annuity provided that Equitable should pay Mrs. Gravis $142.25 monthly for the remainder of her life, commencing April 20, 1946; provisions thereof regarding payments to be made after the death of Mrs. Gravis read as follows:

"Refund. If, upon the death of the Annuitant while this contract is in force, the sum of the Annuity payments which have become due under this contract is less than the consideration, the Society will continue the payment of the Annuity, as each payment becomes due, to the beneficiary as hereinafter designated until the total amount of the Annuity payments made by the Society equals the consideration, the final payment to be of an amount equal to the excess of the consideration over the total Annuity payments previously made by the Society, subject, however, to any provision for commutation in the provision hereof entitled `Beneficiary.\'

"Beneficiary

"1. Any Annuity payments which become due after the death of the Annuitant shall be paid to the Annuitant\'s brother, Rudolph A. Haberman, Jr., (herein called the beneficiary, with reservation of the right to change the beneficiary).

* * * * *

"3. If the executors of the administrators of the Annuitant be not expressly designated as beneficiary, any unpaid Annuity payments, with respect to which there is no designated beneficiary living when such payments become due, shall be paid to the executors or administrators of the survivor of the Annuitant and beneficiary. Any Annuity payments becoming due to the executors or administrators of any person shall be commuted on the basis of 2½% per annum compound interest and paid in a single sum to such executors or administrators."

While Haberman was originally designated as beneficiary, Mrs. Gravis later changed the beneficiary to her mother and father. However, Mrs. Gravis' mother and father were killed in an automobile accident several years prior to Mrs. Gravis' death, and there were no other designations of a beneficiary under the annuity contract.

The monthly payments of $142.25 were paid to Mrs. Gravis by Equitable from April 20, 1946 through November 20, 1949. On December 19, 1949, at the request of Mrs. Gravis, to enable her to pay certain tax deficiencies, the annuity was surrendered and rewritten so as to reduce the consideration stated from $50,000 to $43,827.77, and the monthly payments from $142.25 to $124.69; in exchange for which Equitable paid over to Mrs. Gravis and the Collector of Internal Revenue the sum of $4,001.15. All other terms of the rewritten annuity were the same as in the original, and there is no dispute here in connection with the fairness or propriety of that transaction. Equitable paid the reduced monthly installments to Mrs. Gravis from December 20, 1949, through January 20, 1953; it also paid her $918.18 in dividends on the annuity during her lifetime. Mrs. Gravis died February 15, 1953.

Since the total amount of monthly installments paid to Mrs. Gravis, $10,996.92, was substantially less than the consideration paid, additional payments were due under the "Refund" provisions of the annuity set out above.

Equitable interpreted these provisions as calling for the payment to Haberman as executor of Mrs. Gravis' estate, of the lump sum of $25,811.38, this being the commuted value, at 2½ compound interest, of the additional monthly installments which would have been required to make the total amount of monthly payments under the annuity equal the consideration.

Haberman, on the other hand, contended that Equitable was obligated to pay the estate $35,001.93, which is the difference between the original $50,000 consideration and the total amount, other than dividends, previously paid to Mrs. Gravis, namely $10,996.92 in monthly payments and $4,001.15 on the rewriting of the annuity. Equitable paid Haberman the $25,811.25 it admitted to be due, which payment was accepted by Haberman on July 17, 1953, "without prejudice" to the rights of the parties.

Haberman tendered to Equitable the annuity and the $918.18 paid as dividends under the annuity, demanded the additional sum of $9,190.55, and threatened suit if payment was not made. Equitable thereupon brought this declaratory judgment action to determine whether it was liable for the $9,190.55 or any part thereof, and for an injunction against further threats. Haberman counterclaimed for the $9,190.55 with interest.

The trial court granted Equitable's motion for summary judgment, and Haberman appealed, relying on three points:

(1) Haberman contends that the annuity is a "security" as defined in the Texas Securities Act, and that, since the provisions of the Texas Securities Act were not complied with in connection with the issuance and sale of the annuity, and the agent who sold the annuity was not a registered securities dealer or salesman, and Equitable was not a registered securities dealer, the annuity is voidable at Haberman's election, pursuant to § 33a of the Act. Equitable contends, on the other hand, that the annuity is not a "security" as that term is defined in the Texas Securities Act, and, therefore, that the provisions of that Act have no application to the annuity nor to the issuance and sale thereof.

(2) Haberman contends that under the terms of Art. 2031a, Texas Civil Statutes, Equitable was required to file with the Secretary of State of Texas a power of attorney designating some resident of Texas as its agent upon whom process might be served, and that having failed to file such designation with the Secretary of State, Equitable's acts in Texas, including the issuance and sale of the annuity, are either void or voidable. Equitable contends, on the other hand, that Art. 2031a has no application to a foreign life insurance company which has complied with all of the provisions of the Texas Insurance Code, including the obtaining of a Certificate of Authority issued by the Board of Insurance Commissioners of Texas authorizing it to transact a life insurance and annuity business in Texas and the appointment of the Chairman of the Board of Insurance Commissioners of Texas as the Company's agent for service of process.

(3) Haberman contends that the annuity is ambiguous, being susceptible of the interpretation that the amount payable to the estate of the annuitant upon her death was to be $35,001.93, and the ambiguity should be resolved against Equitable. Equitable contends that the annuity is unambiguous and can mean only that upon annuitant's death with no beneficiary surviving her, it was obliged to pay her estate a lump sum representing the commuted or discounted value, at 2½% per annum compound interest, of the additional monthly installments which would have been required to make the total amount of all monthly payments under the annuity equal to the consideration, this sum being $25,811.33.

We shall consider these points in the order named.

(1) The Texas Securities Act, Art. 600a, Texas Civil Statutes, defines a security as follows:

"Sec. 2(a) The term `security\' or `securities\' shall include any share, stock, treasury stock, stock certificate under a voting trust agreement, collateral trust

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