Republic Nat. Life Ins. Co. v. Spillars, A-9457

• Decision Date: 22 May 1963
• Docket Number: No. A-9457,A-9457
• Citation: 5 A.L.R.3d 957,368 S.W.2d 92
• Parties: REPUBLIC NATIONAL LIFE INSURANCE COMPANY, Petitioner, v. Sudie SPILLARS et al., Respondents.
• Court: Texas Supreme Court

Page 92

368 S.W.2d 92

5 A.L.R.3d 957

REPUBLIC NATIONAL LIFE INSURANCE COMPANY, Petitioner, v. Sudie SPILLARS et al., Respondents.

No. A-9457.

Supreme Court of Texas.

May 22, 1963.

Rehearing Denied June 20, 1963.

Thomas G. Nash, Jr., Dallas, for petitioner.

Mac L. Bennett, Jr., Normangee, Fulbright, Crooker, Freeman, Bates & Jaworski, M. W. Parse, Jr., with above firm, Houston, for respondents.

SMITH, Justice.

This is a suit on a group credit life insurance contract issued by Republic National Life Insurance Company to the Farmers State Bank of Madisonville, Texas. The original action was brought by the Bank against the estate of J. D. Spillars, Sr., to recover on a promissory note. By stipulation the Bank relinquished its claim against Republic National in favor of the estate of J. D. Spillars.

Sudie Spillars, as temporary administrator of the estate of J. D. Spillars, Sr., filed this third-party claim against Republic National seeking to recover the sum of $5,000.00, together with penalty and attorney fees, upon the theory that the life of J. D. Spillars, Sr., was insured at the time of his death under a policy of group credit life insurance. Sudie Spillars et al. recovered on their cross action in a nonjury trial and in the Court of Civil Appeals. 363 S.W.2d 373. The judgments of the courts below are reversed, and judgment is here rendered for Republic National Life Insurance Company.

The facts leading up to the filing of this suit are as follows: In 1957 or 1958 J. D. Spillars, Sr., became indebted to the Farmers State Bank; this debt was still in existence on July 1, 1960, when the group creditor life insurance contract between the Farmers State Bank and the Republic National became effective.

On December 23, 1960, Spillars executed a note to the Bank in renewal of the prior existing debt in the amount of $8,052.92. No additional funds were advanced or loaned to J. D. Spillars, Sr. On that same date Spillars delivered to the President of the creditor bank a check in the amount of the premium for his coverage under the group policy. Spillars did not then have sufficient funds on deposit to pay the check, and the President temporarily held it in his desk. Later Spillars told the Bank President he realized he was overdrawn, but that he would take care of the check. The President testified that 'he came back in here and told me that he was fixing to sell the calves and to go ahead and write the insurance; and I wrote the insurance on January 14th, at his request.' A certificate of insurance bearing the date of January 14, 1961, was issued to Spillars by the President of Farmers State Bank as the agent of Republic National. On January 17, 1961, three days after the issuance of the certificate of insurance, J. D. Spillars, Sr., died.

The controversy centers around the proper interpretation to be given the contractual provisions of the master policy issued to the Bank which relate to creditor coverage. The relevant provisions of the policy are as follows:

'Coverage: All debtors of the (Bank) * * *, whose respective names and amounts of indebtedness as of the effective date of this policy are submitted by the (Bank) to the Company * * *, shall be initially insured * * * on the effective date of this policy. * * * While this policy is in force, all new debtors * * * may likewise be insured hereinunder from the date they become new debtors of the (Bank).' (Emphasis added.)

It is undisputed in the record that: (1) on the effective date of the master contract, July 1, 1960, J. D. Spillars was a debtor of the Bank, and his name was not included as one of the debtors to be...