Taylor v. Bonilla

• Decision Date: 21 November 1990
• Docket Number: No. 3-89-191-CV,3-89-191-CV
• Citation: 801 S.W.2d 553
• Court: Texas Court of Appeals
• Parties: Tamy Lynn TAYLOR, Appellant, v. Tony BONILLA, et al., Appellees.

Page 553

801 S.W.2d 553

Tamy Lynn TAYLOR, Appellant, v. Tony BONILLA, et al., Appellees.

No. 3-89-191-CV.

Court of Appeals of Texas,

Austin.

Nov. 21, 1990.

Rehearing Overruled Dec. 19, 1990.

John T. Anderson, Graves, Dougherty, Hearon & Moody, Austin, for Tamy Lynn Taylor.

Jan Soifer, Rubinstein & Perry, Austin, for Tony Bonilla.

John H. Spurgin, II, McGinnis, Lochridge & Kilgore, Austin, for New York Life Ins. Co.

Before SHANNON, C.J., and ABOUSSIE and JONES, JJ.

ON MOTION FOR REHEARING

JONES, Justice.

The opinion and judgment issued by this Court on October 17, 1990, are withdrawn, and the following opinion is substituted in place of the earlier one.

Tamy Lynn Taylor, plaintiff below, appeals from a judgment that she take nothing from defendants, Tony Bonilla and New York Life Insurance Company. ¹ Mrs. Taylor's claims arose out of New York Life's denial of coverage under both a term Pleading in the alternative, Mrs. Taylor contended that one policy or the other was in force at the time of Mr. Taylor's death. Although both parties admitted Mr. Taylor had taken steps to replace his whole life policy with a term life policy, defendants asserted that the term policy was not yet in force at the time of his death because no consideration had been given for it. Defendants also denied the effectiveness of the whole life policy, arguing that it had been surrendered before Taylor's death. Consequently, New York Life denied liability under both policies. Mrs. Taylor alleged that Bonilla, an agent for New York Life, was guilty of negligence, breaches of fiduciary and good-faith duties, and violations of the DTPA and the Insurance Code. She sought recovery from New York Life under the term policy, or in the alternative, under the whole life policy. Further, she alleged that the "cursory investigation" New York Life had conducted before denying her claims constituted a breach of the duty of good faith and fair dealing.

life insurance policy ("the term policy") and a whole life insurance policy ("the whole life policy"), one or the other of which she contends insured the life of her husband, Scott Taylor, at the time of his death. Mrs. Taylor sought damages for breach of contract, breach of fiduciary duty, breach of the duty of good faith and fair dealing, violations of the Deceptive Trade Practices Act, Tex.Bus. & Com.Code Ann. §§ 17.41-17.61 (1987 and Supp.1990) (DTPA), and the Texas Insurance Code, and negligence. The trial court granted a partial summary judgment for New York Life as to the term policy contract claim and a directed verdict for New York Life as to the whole life policy contract claim. The jury returned a verdict favorable to both defendants on the remaining claims, and the trial court rendered judgment in accordance therewith. We will affirm the trial court's judgment in part and reverse it in part.

Just prior to trial, the district court granted New York Life's motion for partial summary judgment on the term policy contract claim. The court ruled that New York Life had shown, as a matter of law, that Mr. Taylor had given no consideration for the policy. After the close of the evidence, the court granted New York Life's motion for directed verdict as to the whole life policy contract claim. The extra-contractual claims were submitted to the jury, which refused to find that Bonilla or New York Life had committed negligent acts, violated the DTPA or Insurance Code, or breached any fiduciary or good-faith-and-fair-dealing duty. The court then rendered a take-nothing judgment, from which Mrs. Taylor appeals.

On appeal, Mrs. Taylor complains of the granting of the partial summary judgment and directed verdict on the contractual claims, asserting that genuine issues of material fact existed. In addition, she challenges each of the jury's refusals to find any extra-contractual liability as being against the great weight and preponderance of the evidence.

THE FACTS

In December 1985, Scott Taylor met with Bonilla to discuss surrendering Taylor's whole life insurance policy and obtaining its accumulated cash surrender value. Although the parties disagree whether Taylor intended to replace the policy when he first contacted Bonilla, they do not dispute that during the meeting the two men discussed Taylor's obtaining a $100,000 term life policy. This policy was to "replace" the whole life policy being surrendered. During the same meeting, Bonilla completed and Taylor signed a number of forms drafted by New York Life. These included an application for the term policy and a form requesting surrender of the whole life policy and return of its accumulated cash value. On the term policy application, Bonilla noted that the whole life policy was to terminate when the new term policy was issued. In addition, Taylor signed a sheet entitled "Important Notice Regarding Replacement," which included the following warning:

If, after studying the information made available to you, you do decide to replace the existing life insurance with our company with a new life insurance policy issued by our company, you are Taylor never gave Bonilla a check for the first premium on the term policy. He also failed to complete a policy loan form or a dividend withdrawal form, either of which would have allowed him to use the accumulated cash value of the whole life policy to pay the first premium on the term policy. Approximately two weeks before his death, Taylor received a New York Life check in "full settlement of all claims" under the whole life policy. Taylor negotiated the check. During the same two week period, Bonilla received the newly issued term policy. Before Bonilla could deliver the policy to Taylor, however, Taylor was killed in a car wreck.

urged not to take action to terminate or alter your existing life insurance coverage until after you have been issued the new policy, examined it and have found it acceptable to you. If you should terminate or otherwise materially alter your existing coverage and fail to qualify for the life insurance for which you have applied, you may find yourself unable to purchase other life insurance or able to purchase it only at substantially higher rates.

Mrs. Taylor called Bonilla to inform him of her husband's death and to ask about his coverage with New York Life. Bonilla told her that the new term policy was not yet in force because no premium had been paid on it. Mrs. Taylor revealed that her husband had, before his death, received a check from New York Life and cashed it. Bonilla then told her he would determine the status of the whole life policy and let her know what he found out. Later, Bonilla called to tell her that, because Taylor had accepted payment of the cash value of the policy by negotiating New York Life's check, the surrender of the whole life policy was complete before the accident. Consequently, Bonilla concluded that Taylor had died without any coverage by New York Life.

THE PARTIAL SUMMARY JUDGMENT

Before trial began, New York Life moved for summary judgment on the term policy contract claim, arguing that it had shown conclusively that no consideration had been given for the policy. ² Mrs. Taylor admitted that her husband had not given Bonilla a premium for the policy. She contended, however, that the two men had intended the surrender of the whole life policy to provide consideration for the term policy. Agreeing with New York Life, the trial court granted a take-nothing partial summary judgment as to the term policy contract claim.

This issue is one of first impression in Texas. Counsel have been unable to point us to, and we have not found, any Texas case expressly dealing with the question of whether the surrender of one policy may serve as consideration for the issuance of a new policy. At least one noted authority states that a surrender of one policy may, indeed, serve as consideration for another. See J. Appleman & J. Appleman, Insurance Law and Practice § 1759 (1967). Fundamental contract principles support this proposition as well. It is well established that, where no other consideration is shown, mutual obligations by parties to an agreement will furnish sufficient consideration to constitute a binding agreement. Texas Gas Utilities Co. v. Barrett, 460 S.W.2d 409, 412 (Tex.1970). In addition, the general rule is that a promisee's surrender of valid contractual rights, which Defendants' contention that Taylor paid no consideration is correct only in the sense that he did not remit a check or cash with the application or complete a dividend withdrawal or policy loan form to pay the premium out of the cash value of the whole life policy. Taylor did, however, surrender his right for the whole life policy to continue in force. ³ Under the terms of the policy, Taylor had a right to keep the policy in force and expect the company to pay its face amount to the designated beneficiary on his death. Neither party argues that Taylor would have had that right if the policy had been effectively surrendered. If the policy was surrendered, therefore, Taylor gave up his valuable contractual right to have the insurance company pay the face amount of the policy to the beneficiary of his choice. Plaintiff asserts that he gave up this right in return for a promise from the company to provide him with term insurance, conditioned only on his meeting underwriting guidelines. We conclude that where one policy has in fact been surrendered in return, at least in part, for the insurance company's promise to issue a new policy, then the surrender of the first policy constitutes some consideration for issuance of the new policy. ⁴

he is not bound to surrender, constitutes valuable consideration for a return promise. Anderson v. Ladd, 131 Tex. 479, 115 S.W.2d 608, 611 (1938).

The difficulty in the present case is determining whether Taylor actually surrendered the whole life policy in return for the promise of the company, through its agent Bonilla, to issue Taylor...