National Mut. Ben. Ass'n v. Aaron

• Court: Texas Court of Appeals
• Writing for the Court: Baugh
• Citation: National Mut. Ben. Ass'n v. Aaron, 45 S.W.2d 371 (Tex. App. 1931)
• Decision Date: 09 December 1931
• Docket Number: No. 7658.,7658.
• Parties: NATIONAL MUT. BEN. ASS'N v. AARON.<SMALL><SUP>*</SUP></SMALL>

45 S.W.2d 371

NATIONAL MUT. BEN. ASS'N v. AARON.^*

No. 7658.

Court of Civil Appeals of Texas. Austin.

December 9, 1931.

Rehearing Denied January 6, 1932.

Appeal from District Court, Travis County; J. D. Moore, Judge.

Action by Thomas Norton Aaron against the National Mutual Benefit Association. From a judgment for plaintiff, defendant appeals.

Affirmed.

Ball & Simmons, of Houston, for appellant.

Coleman Gay and Hart, Patterson & Hart, all of Austin, for appellee.

BAUGH, J.

Suit upon a benefit certificate issued by appellant, a mutual assessment corporation, to Georgia Aaron, deceased, in which appellee, her husband, was named beneficiary. Appellant asserted forfeiture of the policy on the ground that the insured had failed to pay assessments within the time provided in the policy. Trial was to the court without a jury, and judgment rendered for the amount of the policy, 12 per cent. penalty, and attorney's fees; hence this appeal.

The first contention made is that, being a mutual benefit association, chartered in 1905, under the General Incorporation Law (Rev. St. 1895, art. 638 et seq., as amended), without capital stock, whose funds were raised by assessment on its members to pay death claims, appellant is not subject to the provisions of article 4736, R. S. 1925, the penalty and attorney's fee statute.

We do not sustain this contention. Article 4736, R. S. 1925, invokes substantially the same penalty as did art. 3071, R. S. 1895, and art. 4746, R. S. 1911. Appellant was incorporated in 1905, apparently under the general incorporation laws, and not under the provisions of title 58, R. S. 1895. While article 3096w, R. S. 1895, did exempt mutual benefit organizations operated on the assessment plan from such penalty, it did so on condition that they make annual statement under oath to the department of insurance of the state giving the information therein specified, and further provided that for failure to do so they would be deemed insurance companies conducted for profit, amenable to the laws governing such companies, including the penalty statute. There is no contention that appellant complied with said article 3096w, necessary to entitle it to such exemption. In 1909 the Legislature undertook a more extensive and comprehensive regulation of insurance companies (Acts of 1909, c. 108, p. 192 et seq.) title 71, R. S. 1911. It then defined a life insurance company as follows: "A life insurance company shall be deemed to be a corporation doing business under any charter involving the payment of money or other thing of value, conditioned on the continuance or cessation of human life, or involving an insurance, guaranty, contract or pledge for the payment of endowments or annuities." Article 4724, R. S. 1911; article 4716, R. S. 1925. The Legislature has also from time to time authorized the formation and operation of various kinds of associations on co-operative plans, but in each instance has, where exemptions of same from the provisions of the general law was contemplated, expressly so provided, and has prescribed the conditions for such exemption. See article 4798, R. S. 1911, relating to mutual assessment accident insurance companies; article 4859, R. S. 1911, relating to fraternal beneficiary associations. Under the revision of 1925, the only exemptions we find in the statute from the penalties prescribed in said article 4736, are mutual assessment accident companies (article 4788, R. S. 1925), fraternal benefit societies (articles 4823 and 4859, R. S. 1925), and local mutual aid associations (Acts 1929, p. 563, c. 274 [Vernon's Ann. Civ. St. arts. 4875a—1 to 4875a—31]). It is to be noted also that the Forty-Second Legislature (Acts Reg. Sess. 1931, c. 48, § 5a [Vernon's Ann. Civ. St. art. 4831a]) imposed a like penalty on fraternal benefit societies for failure within 60 days to pay a claim after demand therefor.

We think that article 4716, R. S. 1925 (same as article 4724, R. S. 1911) was intended to and does include any corporation writing life insurance, whether for a fixed premium or a post mortem assessment plan, not clearly regulated by, nor operated under, other statutes in title 78 expressly governing same. It is not contended in this case that appellant operates under any of the provisions of title 78, R. S. 1925, governing fraternal benefit, mutual aid, or local relief organizations. On the contrary, the proof shows that appellant has made no reports to the board of insurance commissioners, and, so far as the record shows, is under no regulation whatever. The term "life insurance company," as defined in said article 4716, R. S. 1925, includes any "corporation" writing life insurance throughout the entire state, as appellant was shown to be doing, whether with or without capital stock, and on whatever plan; and, unless the insurer brings itself under some other provision of title 78, granting it immunity therefrom, it is subject to the penalties of the general law. American Ins. Union v. Wylie (Tex. Civ. App.) 23 S.W. (2d) 491. The mere fact that the corporation has no capital stock and writes assessment as needed insurance is not sufficient in itself to do so.

Pledger v. Business Men's Acc. Ass'n (Tex. Com. App.) 228 S. W. 110, Int. Travelers' Ass'n v. Branum, 109 Tex. 543, 212 S. W. 630, and Schumann v. Brownwood Mut. Life Ins. Ass'n (Tex. Com. App.) 286 S. W. 200, cited by appellant, hold that article 4746 does not apply to the mutual benefit associations involved in those cases. In each of those cases, however, the insurer was organized or was operating under some statute clearly exempting it from the provisions of chapter 2 of title 78. No such case is here presented. Appellant failed to bring itself under any of the statutes applicable to those cases.

Appellant's second proposition denies that any statutory demand was made of appellant, a prerequisite to recovery of the penalty. Demand of some sort for payment of such insurance before the statutory penalty can be invoked was of course necessary. A special Supreme Court in Mutual Life Ins. Co. v. Ford, 103 Tex. 522, 131 S. W. 406, held that mere forwarding proofs of death did not constitute a statutory demand. In First Tex. Prudential Ins. Co. v. Long (Tex. Civ. App.) 28 S.W.(2d) 220 (writ refused), however, it was held that, where the beneficiary presented such proofs in such manner as to notify the company that she was making demand for payment, the requirements of the statute had been met. In the instant case the appellee went in person to the offices of the appellant, notified the president of the corporation of his wife's death and asked for instructions. He was given blanks for proofs of death, returned to Austin, executed and forwarded same to the company about July 20, 1930. The record does not disclose the contents of appellee's letter of transmittal; but there was introduced in evidence a letter from appellant to appellee, dated July 25, 1930, the caption of which read, "Re: Claim of Mrs. Georgia Aaron, Deceased," acknowledging receipt of proofs of death of Mrs. Aaron, but denying liability. While the statute in question is highly penal and must be strictly construed, we think the foregoing was sufficient to sustain a finding of the trial court that the company recognized the conduct of appellee, the proofs of death, and correspondence with it, as a demand for payment, or even that its letter of July 25th admitted a written claim for payment of such insurance. The form of the demand is not material. The essential thing is that the company be advised that the insured is dead and that the beneficiary is asserting a right against it under the policy. Penn. Mutual Life Ins. Co. v. Maner, 101 Tex. 553, 109 S. W. 1084. And it has been held in Standard Acc. Ins. Co. v. Bittle (C. C. A.) 36 F.(2d) 152, that demand may be inferred from a denial of liability on the part of the company. The record in this case shows such denial of liability by appellant and refusal to pay said policy after receipt of the proofs of loss.

The next contention made by appellant is that appellee was entitled to recover at most only $1,000 under the policy issued. The deceased applied for a $2,500 policy. The company, being then out of printed forms for a $2,500 policy, used a printed form for a $5,000 policy, to which it attached the following indorsements:

"Indorsement No. 1.

"The benefits under this policy are reduced 50% and the assessments are reduced from $5.50 to $3.00 each. By reason of age the benefits are still reduced as outlined in indorsement No. 2.

"Indorsement.

"By reason of age requirement the association and the insured agree that should death occur within the first year 30% of the benefits of the policy shall be paid subject to the policy, should death occur within the second year 40% of the benefits of the policy shall be paid subject to the conditions of the policy and 50% thereafter shall be paid subject to the conditions of the policy, dated this 10th day of April, 1929, at Houston, Texas."

Mrs. Aaron died within the second year after issuance of the policy. She applied for, and paid, nineteen assessments on a $2,500 policy. Without extended discussion of the terms of the indorsements, which must be strictly construed against the company, it is obvious that the 30 per cent. and 40 per cent. reductions named, like the 50 per cent., were intended to apply and did apply to the amount named in the face of the policy; that is, to the $5,000. To construe indorsement No. 2 otherwise would be unreasonable and limit her insurance, even after the expiration of the two-year period, to a maximum of $1,250, when the uncontroverted evidence shows that a $2,500 policy was intended.

The fourth proposition asserts error in rendering judgment for a specific sum, contending that the trial court should have directed the officers of appellant to levy an assessment on the members of the group in deceased's class, and to pay over the proceeds...