Southern States Life Insurance Company v. Newlon, 4038

• Decision Date: 14 January 1966
• Docket Number: No. 4038,4038
• Citation: 398 S.W.2d 622
• Parties: SOUTHERN STATES LIFE INSURANCE COMPANY, Appellant, v. E. R. NEWLON, Appellee.
• Court: Texas Court of Appeals

Page 622

398 S.W.2d 622

SOUTHERN STATES LIFE INSURANCE COMPANY, Appellant, v. E. R. NEWLON, Appellee.

No. 4038.

Court of Civil Appeals of Texas, Eastland.

Jan. 14, 1966.

Rehearing Denied Feb. 4, 1966.

Bracewell, Reynolds & Patterson, Joe H. Reynolds and Stanley B. Binion, Houston, for appellant.

Davis & David, John L. David, Dalhart, for appellee.

GRISSOM, Chief Justice.

E. R. Newlon sued Southern States Life Insurance Company for the purpose of having four new life insurance policies cancelled and some old policies reinstated. In a jury trial, judgment was rendered for the plaintiff and the defendant has appealed.

Newlon alleged that on November 10, 1962, the defendant insurance company issued to him four new insurance policies covering the lives of his children; that before November, 1962, he owned three paid up life insurance policies issued by defendant; that he was approached by Sinclair, a general agent for said company, who solicited new insurance and stated that the company was giving its paid up life policy holders paid up insurance policies to release funds held in reserve; that this would benefit both the company and such policy holders; that Newlon informed Sinclair he did not want to buy any new insurance but that he wanted to change the beneficiaries in his three old paid up life insurance policies; that Sinclair presented to Newlon forms for his signature which he said would procure the desired change in beneficiaries. Sinclair represented that it would be necessary for Newlon to deliver his old paid up life insurance policies to him so that he could send them to the company and have the change of beneficiary noted thereon; that, about the 10th of November, 1962, two of defendant's agents returned to Newlon's home and returned to him his three old paid up policies together with four new policies insuring the lives of his children; that Whitaker and another agent, who delivered said policies to Newlon represented that they were agents of defendant and again informed Newlon that the four new policies were paid up life insurance policies and that no premiums would ever be required thereon, whereupon, newlon accepted them and gave the agent a receipt therefor. Newlon alleged he was repeatedly assured that nothing was being done to his old paid up life insurance policies; that they would remain unchanged except as to the change in beneficiary; that Newlon would not have accepted the policies but for the representations of Sinclair and Whitaker, the duly authorized agents and representatives of Southern States; that said representations were made for the purpose of misleading him and inducing him to purchase new policies and surrender his paid up life insurance policies so that a lien for premiums on the new policies could be noted thereon. Newlon alleged that he did not learn of the falseness of said statements until about two months after the policies were delivered to him when another agent informed him that he had obtained a loan against his old paid up life insurance policies and that additional premiums would be charged on the new policies; that about three months after the policies were delivered he informed the company that he did not want any loans against his old policies and that he wanted the new policies cancelled as of the date they were issued and the loan value reinstated on his old paid up policies, but Southern States refused to cancel the new policies and refused to reinstate the loan values on the old paid up life insurance policies. Wherefore, he sued to have the new policies cancelled for fraud and the loan value of his old paid up life insurance policies reinstated.

Southern States Life Insurance Company answered by a general denial. It alleged that in October, 1962, Newlon executed four applications for life insurance on his four children; that he executed said four applications each of which contained provision that it and the policy issued in reliance thereon should constitute the entire contract, and that the company would not be affected by any statement of its agents not contained in said application; the Newlon and wife signed separate instruments designated as assignments of policies to said company to secure loans for payment of some premiums on the new policies and signed instruments directing said company to apply the proceeds of the policy loans on Newlon's old paid up life insurance policies to payment of the first one and one-half annual premiums on the four new policies insuring his children; that said policies were delivered to Newlon about November 10, 1962, when he signed a receipt therefor stating that each policy was issued as applied for; that the insurance company relied on such instrument signed by Newlon, changed its position and undertook the risk and expense of insuring Newlon's children; that Newlon knowingly signed the four applications for new insurance each of which was entitled assignment of policy to Southern States to secure policy loans and the two instruments signed by plaintiff instructed the defendant to apply the proceeds of the loans on the old paid up policies to payment of the first one and one-half annual premiums on the new policies; that the insurance company relied on these requests and changed its position and incurred risk and expense in issuing the new policies and, therefore, that Newlon was estopped to have the new policies cancelled and the loan value of the old policies reinstated.

Defendant specially pleaded that by signing or accepting said instruments Newlon bound himself by their terms, since a person claiming fraud 'must exercise ordinary care for the protection of his own interests and is charged with knowledge of all facts which would have been discovered by a reasonably prudent person similarly...