Hurlbut v. Gulf Atlantic Life Ins. Co.
| Decision Date | 16 December 1987 |
| Docket Number | No. C-4596,C-4596 |
| Citation | 749 S.W.2d 762 |
| Parties | C. Daniel HURLBUT, et al., Petitioners, v. GULF ATLANTIC LIFE INSURANCE COMPANY, et al., Respondents. |
| Court | Texas Supreme Court |
Insurance agents C. Daniel Hurlbut and A.C. Hovater sued their former employer, Gulf Atlantic Insurance Company, its parent corporation, and several corporate officers for fraud, business disparagement, and tortious interference with contract rights. After a trial by jury, the trial court rendered judgment for actual and exemplary damages against all defendants. The court of appeals reversed the judgment of the trial court and rendered judgment that Hurlbut and Hovater take nothing, holding that all claims were barred by limitations. 696 S.W.2d 83. We reverse the judgment of the court of appeals and hold that a fact issue was raised regarding when Hurlbut and Hovater should have discovered defendants' fraud. Because the court of appeals additionally held that the great weight and preponderance of the evidence supported a finding that Hurlbut and Hovater should have discovered the fraud more than two years prior to filing suit, we remand the cause to the trial court for new trial.
The facts are discussed in some detail in the majority and dissenting opinions of the court of appeals and will not be repeated at length here. The following recitation is favorable to the plaintiffs, Hurlbut and Hovater, and from the verdict is apparently the version accepted by the jury.
In the spring of 1974, Hurlbut, Hovater and several officers of Gulf Atlantic met to discuss a new enterprise. At this meeting, representatives of Gulf Atlantic proposed that Hurlbut and Hovater form a partnership to serve as the administrator of a proposed health insurance trust which would sell and service group health insurance policies underwritten by Gulf Atlantic. Following this meeting, Hurlbut and Hovater returned to their home in Houston and formed "Agency Associates." Gulf Atlantic advanced funds to cover start-up costs. Gulf Atlantic also recommended an attorney to Hurlbut and Hovater to use in preparation of the trust documents. After the attorney had drafted the appropriate documents, they were signed by Hurlbut, Hovater and an officer of the bank Agency Associates intended to use as trustee of the premium trust account. The executed trust agreement was then returned to the attorney who Hurlbut and Hovater believed would, in conjuction with Gulf Atlantic, obtain state approval of the master policy.
In the late summer of 1974, Kenneth Thompson, an officer of Gulf Atlantic and Hurlbut and Hovater's primary contact with the company, instructed them to start selling group health insurance under the trust arrangement. When Hurlbut and Hovater inquired about the master policy, they were sent a copy of a proposed policy to be issued to the "West Texas Pipe Trades Health Insurance Trust" with the explanation that Agency Associates' master policy would be virtually identical. Hurlbut and Hovater sold the group health plan through the fall and winter of 1974. These sales were made without benefit of the master policy. Gulf Atlantic, however, continued to assure Hurlbut and Hovater that all was in order with the program and that the master policy would soon be provided.
Potential clients who were concerned regarding Agency Associates' inability to produce a master policy were referred to Gulf Atlantic by Hurlbut and Hovater. One such client placed a call to Gulf Atlantic in December 1974. Thompson was unavailable so the caller talked with Gulf Atlantic's president, William Barnes, who denied that Gulf Atlantic was underwriting Agency Associates' group health insurance program. This client relayed his conversation to Hurlbut and also contacted the office of the Attorney General.
Hurlbut thereafter contacted Thompson who again reassured him that Gulf Atlantic was still underwriting the program. Hurlbut also contacted Jack Warner, vice president of Nationwide Corporation, the corporate parent of Gulf Atlantic. Warner had initially worked with Hurlbut and Hovater during the formative stages of Agency Associates. Warner also reassured Hurlbut and suggested a meeting between Barnes, Hurlbut and Hovater to straighten out the matter.
This meeting took place in Dallas at Gulf Atlantic's corporate offices on January 21, 1975. There Hurlbut and Hovater were surprised by the appearance of Bill Flanary, an assistant Attorney General assigned to investigate the group health insurance program being sold by Agency Associates. At this meeting Barnes told Flanary that Hurlbut and Hovater did not have authority to write group insurance for Gulf Atlantic through a trust plan.
Following this meeting, Hurlbut and Hovater accompanied Flanary to a local office of the Attorney General in Dallas and cooperated in the investigation. As a result of this investigation and those of local authorities as well, the assets of Agency Associates were placed in receivership, the insurance licenses of Hurlbut and Hovater were revoked and both civil and criminal charges were brought against them. Both Hurlbut and Hovater were arrested and jailed, lost their ability to make a living selling insurance and sustained other damage.
The motivation behind Gulf Atlantic's abandonment of its original arrangement with Hurlbut and Hovater is possibly explained by the difficulty it experienced in obtaining approval of the master policy for West Texas Pipe Trades Health Insurance Trust, the same policy previously provided to Hurlbut and Hovater with the explanation that theirs would be the same. Gulf Atlantic had some difficulty with the State Board of Insurance because it had authorized the sale of group health insurance prior to the approval of this master policy. Rather than acknowledge additional misconduct and complicity in the sales that Hurlbut and Hovater had made prior to issuance of a master policy, it is asserted that Gulf Atlantic decided to conceal its role by denying it had ever agreed to underwrite the program or obtain the state's approval of the master policy and thereby shift the entire responsibility to Hurlbut and Hovater.
On January 21, 1977, Hurlbut and Hovater filed suit against Gulf Atlantic and the other defendants seeking actual and exemplary damages alleging several theories of recovery including fraud, business disparagement and tortious interference with contract rights.
The jury found that each of the defendants "fraudulently represented to plaintiffs that plaintiffs were authorized to write group health insurance through a trust arrangement to be underwritten by Gulf Atlantic Life Insurance Company." The jury further found that this fraudulent representation was a proximate cause of damages or loss to plaintiffs. The jury also found that each of the defendants entered into a conspiracy to defraud plaintiffs by making such representations and that this conspiracy was a proximate cause of plaintiffs' damages. The jury answered "we do not" in response to issue number 27 Do you find from a preponderance of the evidence that plaintiffs knew or by the exercise of ordinary care should have known of the fraud, if any, of the defendants on or before January 20, 1975?
Because Hurlbut and Hovater filed suit on January 21, 1977, an affirmative answer to this issue would have barred recovery on the fraud claim under the two year statute of limitations.
In the trial court, Gulf Atlantic and the other defendants moved for judgment in their favor notwithstanding this finding on the grounds that the evidence established as a matter of law that plaintiffs knew or should have known of the fraud on or before January 20, 1975. Although the trial court denied this motion, the court of appeals agreed that the evidence conclusively established the defendants' limitations defense and that there was no evidence supporting the jury's answer to issue 27. First, the court of appeals held that the plaintiffs had admitted in their pleadings knowledge of the fraud in the latter part of 1974, more than two years prior to the filing of the suit. This judicial admission was binding on the plaintiffs and precluded them from introducing evidence to the contrary. Alternatively, the court of appeals held that even if the plaintiffs petition did not constitute an admission to the defendants' limitations defense, the evidence nevertheless conclusively established the defense. We disagree.
The defendants cannot benefit from a judicial admission in this case. We need not decide whether plaintiffs' pleadings clearly and unequivocally concede the existence of facts amounting to a judicial admission of limitations because defendants did not stand on this alleged admission. In Houston First American Savings v. Musick, 650 S.W.2d 764, 769 (Tex.1983), we said that a party relying on an admission must protect it by objecting to the introduction of evidence contrary to the admission and by objecting to the submission of any issue bearing on the fact or facts admitted. The defendants did not do this in the present case.
The jury's answer to issue 27 is directly contrary to what the defendants contend the plaintiffs admitted in their pleadings. The defendants not only failed to object to the submission of issue 27, they offered their own version of the issue. It was not until their motion for judgment n.o.v. that defendants for the first time pointed out to the trial court that the issue was contrary to an alleged admission in plaintiffs' pleadings. This objection came too late. The defendants had...
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