Gause v. Security Life Ins. Co. of America

This suit was instituted by the Security Life Insurance Company of America, hereinafter called "insurance company," against George L. Gause, to recover on a note for $1,258.70, executed by said Gause in payment of the first year's premium on five separate policies of $5,000 each. Defendant acknowledged the execution and delivery of the note, but alleged that the agent of the insurance company, before and at the time of the execution of the note, represented to defendant that if he would take out said insurance policies and execute said note that plaintiff would lend to defendant the sum of $15,000 at 5 per cent. per annum, taking as security certain real estate owned by defendant in the city of Ft. Worth, Tex., and also taking as additional security said policies; that said loan would be made to defendant at any time during the year or life of said policies that defendant should desire it; that said representations induced defendant to take out said insurance and execute said note, and had they not been made defendant would not have executed the note and taken out the insurance. He further alleged that the representation was false and fraudulent in this, to wit:

"That said plaintiff failed and refused upon the demand of this defendant, within the time specified, to wit, during the life of said policy, to make him a loan of $15,000, at 5 per cent. interest, although this defendant offered the security as represented to him by plaintiff would be satisfactory and sufficient; and said plaintiff has, at all times, failed and refused to make said loan. That at the time said representations were made to this defendant by the agent of said plaintiff, said agent well knew that the same were false and fraudulent, and that said plaintiff would not make said loan, and said representations were made for the purpose to mislead and falsely and fraudulently induce this defendant to execute said note."

It was further alleged that the consideration for the execution of the note had totally failed. Issues were joined by plaintiff's supplemental pleadings on the allegations in defendant's answer as to the alleged misrepresentations, fraud, etc. Upon the conclusion of the evidence, the court gave a peremptory instruction for plaintiff, and defendant has appealed.

Article 4954, Vernon's Sayles' Tex. Civ.Stats., provides, in part, as follows:

"No insurance company doing business in this state shall make or permit any distinction or discrimination in favor of individuals between insurants (the insured) of the same class and of equal expectation of life in the amount of, or payment of, premiums or rates charged for policies of life or endowment insurance, * * * nor shall any such company or agent thereof make any contract of insurance or agreement as to such contract other than as expressed in the policy issued thereon; nor shall any such company, or any officer, agent, solicitor or representative thereof, pay, allow or give or offer to pay, allow or give, directly or indirectly, as an inducement to insurance, any rebate of premiums payable on the policy, or any special favor or advantage in the dividends or other benefits to accrue thereon, or any paid employment or contract for service of any kind, or any valuable consideration or inducement whatever not specified in the policy contract of insurance * * * or anything of value whatsoever not specified in the policy."

In Security Life Insurance Co. v. Allen, 170 S.W. 131, it was held that, in an action on a premium note, parol evidence of an agreement between defendant and plaintiff's general agent that defendant should not be called upon to pay the note if he would help the agent secure other insurance, which defendant did, was objectionable as contradicting the terms of the note; that such a contract as claimed by defendant was made with him by the agent of the insurance company would be in violation of article 4954, supra, and constituted no defense to the note. It has also been held in Morris v. Ins. Co., 200 S.W. 1114, that an agreement of an insurance company to lend money to one at a low rate of interest if he would take out a certain amount of insurance, not being mentioned in the policy, was void under the article above quoted, and that a policy holder could not ask rescission of policy, in that he was deceived by a promise of this character. In the last-cited case Justice Hodges, speaking for the court, says:

"If the promise of the agents to make the loan at the reduced rate of interest is so connected and interwoven with the contract to pay the insurance premiums as to authorize a rescission of the latter upon proof that the promise was fraudulently made, then such a promise must have formed a material part of the actual consideration for entering into the insurance contract. Manifestly such a promise would be an ``offer to give * * * as an inducement to insurance' something of value, and should have been ``specified in the policy.' It is one of the evident purposes of the statute above quoted to prevent discriminations and secret agreements by which certain policy holders may be enabled to secure special favors as a consideration for their contracts of insurance. In this instance the policy of insurance was made an exhibit to the appellant's petition, and there is no contention that it contained the stipulation here insisted upon as a ground for rescission. Hence it falls within the prohibition of the statute.

"That being true, it logically follows that the appellant cannot insist that he was deceived by a promise which the agents could not legally make. He is charged with a knowledge of the provisions of the statute relating to such transactions; he will not be allowed to plead that he did not know that such limitations upon the power to make insurance contracts existed. He is therefore in no attitude to insist that he was the victim of a fraud perpetrated by the representatives of the insurance company."

Article 4953 of the Revised Statutes provides that insurance policies shall contain the entire contract. Under this article, it was decided in Knodel v. Life Insurance Co., 193 S.W. 1138, that a life insurance company was not bound by the parol promise of its agent that there would be no forfeiture of the policy for nonpayment of premium unless the beneficiary were first notified and thereafter defaulted. See Maryland Casualty Co. v. Robertson Co., 194 S.W. 1140. In Knodel v. Insurance Company, supra, it is held, properly we think, that article 4953 is binding alike upon the insured and the insurer. Moreover, it is provided in the policy in the instant case that only certain named officers have power in behalf of the company to make or modify any contract of insurance, etc., and the company is not to be bound by any promises or representations given by any person other than those mentioned. The uncontradicted evidence is the testimony of O. W. Johnson, secretary of the insurance company, on this point, to the effect that L. M. Generes, the agent of the company, had no authority to make representations of the character mentioned, or to do anything in the premises except to solicit and write insurance and to appoint agents for said purpose. Hence we conclude that the defendant below was not in a position to defeat the obligation to pay the note.

For another reason we conclude that the defendant did not place himself in a position equitably to demand a rescission of or to defend against the contract. The evidence shows that the note was executed January 31, 1911, payable September 1st thereafter; that no formal application was ever filed or made by Gause for a loan with the company; that on or about the date of maturity of the note the insurance company began to write letters to Gause calling attention to the fact that his note was past due and asking for a remittance or some satisfactory settlement. No answer seems to have been received from these several letters until March 29, 1912, more than six months after the expiration of the first year, in payment of the premium for which the note was given. In this letter Gause stated that:

"I will pay this note just as soon as I can make a turn, it will be looked after. I am desirous of securing a loan for $15,000.00 for a period of three or five years and it may be acceptable to your company to place this" on certain described property. "If you remember you and I looked this building over and I spoke of possibly wanting a loan, when you were making your trip through Texas."

We think the evidence shows without controversy that no demand for the loan was made during the period of time covered by the first premium, and that no refusal by the company to make the loan occurred at any time prior to April 2, 1912. Even if the alleged representation of the agent as to the company's making the insured a loan at a cheap rate of interest could be held as an enforceable agreement or promise on the part of the company, or if it could be deemed the legal and inducing cause of the contract made, yet we do not think it could be reasonably contended that such promise or representation implied the obligation on the insurance company's part to make a loan to defendant at some time subsequent to the period for which the premium had been paid and at a time when the insured was delinquent as to the payment of the premium note. At the time the tentative application for a loan was made by Gause, the period for which the note had been given had expired by some 60 days and the note Itself was long past due and unpaid. So much for the lack of equitable grounds presented. But we base our conclusions that the judgment must be affirmed upon the statutory reasons given.

We are of the opinion that we cannot disturb the judgment, and that all assignments must be overruled, and the judgment affirmed.