Patton v. American Home Mut. Life Ins. Co.

• Decision Date: 07 February 1945
• Docket Number: No. A-384.,A-384.
• Citation: 185 S.W.2d 420
• Parties: PATTON v. AMERICAN HOME MUT. LIFE INS. CO.
• Court: Texas Supreme Court

185 S.W.2d 420

PATTON v. AMERICAN HOME MUT. LIFE INS. CO.

No. A-384.

Supreme Court of Texas.

February 7, 1945.

Rehearing Denied March 7, 1945.

Error to Court of Civil Appeals of Fifth Supreme Judicial District.

Suit by M. L. Patton against the American Home Mutual Life Insurance Company to recover on a life insurance policy. Judgment for plaintiff was reversed and judgment rendered in favor of defendant by the Court of Civil Appeals, and plaintiff brings error.

Judgment of Court of Civil Appeals reversed and judgment of district court affirmed.

Clifford Craig, of Dallas, for plaintiff in error.

Hassell & Hassell and J. W. Hassell, all of Dallas, for defendant in error.

SLATTON, Commissioner.

This is a suit on a life insurance policy issued August 2, 1941. The insured died January 26, 1943. Suit was filed on the 31st day of August, 1943. The insurance company answered the suit on the 11th day of November, 1943. The insurance company filed an amended answer on the 29th day of February, 1944, in which it sought to avoid the policy on account of fraud on the part of the insured in procuring the policy. The trial court sustained special demurrers to the answer of the insurance company setting up the defense of fraud. On a trial before the court judgment was rendered in favor of the beneficiary against the insurance company for the amount of the policy, penalty and reasonable attorney's fees. The insurance company appealed to the Court of Civil Appeals at Dallas. The judgment of the trial court was affirmed. On motion for rehearing the judgment of the trial court was reversed and judgment was rendered in favor of the insurance company. A writ of error was granted to the beneficiary.

The insurance company contends that under Article 5049 of Vernon's Annotated Civil Statutes its pleaded defense of fraud to the procurement of policy was good notwithstanding the same was presented in court more than two years after the date of the policy; and that since under the stipulation of facts the insured practiced a palpable fraud upon the insurance company in procuring the policy and as soon as the insurance company learned of such fraud it notified the beneficiary of its intention to rescind and tendered a return of all premiums collected. The defense of fraud was good notwithstanding the existence of an incontestable clause contained in the policy which is required by Section 3 of Article 4732, Vernon's Annotated Civil Statutes.

The petitioner contends that under the incontestable clause contained in the policy as required by Section 3 of Article 4732, the insurance company cannot assert its defense of fraud in procuring the policy because such defense was not made in court within two years of the date of the policy. The pertinent part of the statute of Article 5049 reads as follows:

"* * * provided, further, that no defense based upon misrepresentation made in the application for, or in obtaining or securing, any contract of insurance upon the life of any person being or residing in this State shall be valid or enforceable in any suit brought upon such contract two years or more after the date of its issuance, when premiums due on such contract for the said term of two years have been paid to, and received by, the company issuing such contract, without notice to the assured by the company so issuing such contract of its intention to rescind the same on account of misrepresentation so made, unless it shall be shown on the trial that such misrepresentation was material to the risk and intentionally made."

The applicable provision of Article 4732 is Section 3 and reads as follows:

"That the policy, or policy and application, shall constitute the entire contract between ...