Equitable Life Assur. Society of United States v. Ellis

8224 Writ of error granted by Supreme Court. *Page 185 This is an appeal from a judgment rendered in the district court of Travis county October 1, 1908, in favor of Mrs. Amanda M. Ellis, the mother of Caswell G. Ellis, on a policy of insurance in the sum of $25,000 upon the life of the latter, issued by appellant and payable to Mrs. Ellis. The trial was before a jury, who found for appellee, and the substantial question in the case is whether there was sufficient evidence to carry the case to the jury for determination. The inception of the transactions giving rise to the controversy is an application made by Caswell G. Ellis to appellant on March 24, 1904, through its general agents Marx Plummer, of San Antonio, for two policies of insurance upon his life, in the sum of $25,000 each, one to be payable to his wife and the other to his mother. The company issued the policy sued upon in favor of the mother on April 16, 1904, but making the premium fall due each year on March 24th. Ellis died on May 12, 1906, as result of gun shot wound received the day before. The premium which became due March 24, 1906, according to the reading of the policy, had not been paid, and such failure was properly pleaded by appellant, the company, and constitutes its only defense. The specific provision of the policy on the point, as correctly pleaded, was: "This policy shall lapse, and together with all premiums paid thereon shall forfeit to the society on the nonpayment of any premium when due." To avoid the effect of this, appellee pleaded, among other things, with minuteness, facts relied upon by her as estopping appellant to rely upon such failure, and as showing that it had waived any forfeiture of the policy. It developed in the testimony, as indicated by the pleading, that these matters of avoidance urged by appellee rested largely upon or were evidenced by correspondence had by Ellis with Bourke, the cashier of appellant at San Antonio in 1905, and with Wyman, its cashier, at Austin in 1906. Their authority in the premises was denied by appellant, and it invoked another clause of the policy which read that the "policy and the application therefor, taken together, constitute the entire contract, which cannot be varied except by one of the following executive officers of the society at its home office in New York, viz.: The president," etc., naming several officers, but not including the superintendent of the loan and extension department, hereinafter referred to. Under the charge of the court, the jury must have found for appellee more facts than we think necessary for her recovery. Their verdict involves a finding that any forfeiture or right to forfeit was waived, and that the acts of Wyman and others relied upon were within the scope of their employment and therefore the acts of appellant. As we have reached the conclusion that there is sufficient evidence to support these findings, there is no occasion to consider any other. The sufficiency of the evidence to authorize these two findings is presented under the first assignment of error, which complains of the refusal of the trial court to charge the jury to find for appellant. To have been justified in so doing, "the evidence must be of such character that there is no room for ordinary minds to differ as to the conclusion to be drawn from it." Lee v. Railway, 89 Tex. 588, 36 S.W. 63. It matters not what we might think as an original proposition. Twelve men have exercised the functions accorded them and their conclusion had the sanction of the trial judge. That there was permissible grounds for the deductions they drew we think the record here affirms. The question as a, whether the acts and letters of Wyman, Bourke, and Brophy could be considered against appellant upon the issue of waiver, and then whether there was enough to show a waiver, are so intimately connected under the peculiar facts of this case that we will not attempt to separate our discussion thereof. It is admitted that during all the time under consideration R. H. Baker was appellant's general manager for the larger part of Texas, with his office at Austin; that Marx Plummer were its general agents at San Antonio, their territory embracing some 40 counties; that during 1905 W. H. Bourke was its cashier at San Antonio, officing with Marx Plummer, and that all the while James H. Wyman was such cashier at Austin, officing with said R. H. Baker. The direct evidence of the powers and duties of the two cashiers is meager. In the contract with Baker and with Marx Plummer as general agents, there is a provision that the *Page 186 society reserves the right to appoint a cashier to keep the accounts and make collections. He is to keep exclusive control of all policies, renewal receipts, and other vouchers, "subject to the rules of the society and the instructions given by its principal officers." The general agent may collect a first premium, but must remit it to the cashier, and the cashier may order return of policies where the first premium has not been collected. It is fair to assume that parties occupying such responsible positions had written contracts carefully defining their powers and duties; yet, with the pleading of appellee specifically charging a waiver by these cashiers, appellant produces no contract, and offers not even the parol testimony of any executive officer, to show what powers were in fact confided to them, or what powers they ordinarily exercised. It has always been ruled that failure to produce testimony peculiarly within the knowledge and control of a party is proper matter for consideration by a jury. We gather from the reservation in the general agents' contract that the cashier would be subject to certain "rules of the society" and to "instructions" to be given by its principal officers. If those rules and instructions would have supported appellant's contention that its agents were, in their dealings with Ellis, exceeding their "instructions," we are prepared to believe their very able counsel would not have left the matter open to conjecture or speculation. That these cashiers had power to appoint agents to collect or receive premiums appears from the notice sent to Ellis, as required by law, calling attention to the premium to mature March 24, 1906. He is there told he may pay same to James H. Wyman, cashier, Austin, "or to such person as he may duly appoint." His power was certainly not ministerial, nor his duties those calling for the exercise of no discretion. He is the sole representative of the company as to the very important matter of collecting premiums. He is the only person with whom the policy holder can deal. He is put there as the company's representative touching all matters incident to collecting the premiums. He may deal with the insured in person or by his selected representative. That the matter of extension of premiums pertained to them is indicated by the general agents, Marx Plummer, and the general manager, Baker, referring to the cashier the request for an extension made by Ellis. While the fact of agency may not be shown alone by the acts or declarations of the alleged agent, yet, when the relation is established and the scope thereof is under inquiry, then, in the absence of fraud, we see no good reason why the authority in fact exercised may not be considered. This particularly where the principal offers no testimony as to the exact scope of the agent's power, and does not offer to show want of knowledge of the exercise thereof. Here, on March 12, 1905, Ellis applied to Marx Plummer for an extension of the premium then nearly due. Instead of replying, they evidently referred the same to Cashier Bourke, who on March 15,1905, replied thereto. That was the inception of much correspondence between Bourke, acting or assuming to act for the company, and Ellis. Some of the letters by Bourke are entirely in keeping with appellant's insistence as to his powers and duties; but others are not. He, for instance, makes propositions to Ellis to change the payment of premiums from annually to semiannually or quarterly at a different rate. He also quotes Ellis term rates and rates for irregular premiums. Again, on August 21, 1905, as one extension was about to expire, Bourke, in asking for a check to cover a second extension which is being considered, says: "I would suggest that you give this matter your prompt attention as the extension expires on the 22nd of this month, which I have extended giving time to receive your remittance and the enclosed request duly signed"; and on August 24th, after the expiration of the previous extension, in connection with proposal to request the home office for another, Bourke urges Ellis to send in the check, saying that he would be protected pending the negotiations "through my having this remittance." The time for payment of balance of the 1905 premium was finally extended to December 22d, and on November 15th Gerald F. Brophy, superintendent, advised Ellis that the society would accept same if paid on or before December 22, 1905. On that day Ellis mailed from Sartartia to Bourke at San Antonio exchange therefor, and this could not reach San Antonio before December 23d, one day too late. But Bourke receives same and receipts therefor on December 27th. A part of his duties was to keep the company's books and deposit collections in bank to its credit. It is fair to assume that he did so here, and the entry of this large payment could not have appeared thereon earlier than the 23d. On December 14th Bourke has asked Ellis to send promptly check for the balance of $1,005.25, less $61.25 to be deducted according to "our personal agreement"; this deduction being allowed on account of time Ellis was thought not to have been insured. The entry in the books of account must have shown this rebate, if correctly kept, as we should assume they were. There is no effort to show want of knowledge by the company of these powers assumed and in fact exercised by Bourke, notwithstanding the pleading advised it that appellee would expect to show such conduct upon his part, and this is true as to the same course of dealing by Wyman in 1906. There appears no efforts to either deny or restrain the exercise by them of these powers, until after Ellis' death, *Page 187 and then only by showing the stipulation inserted in the policy contract entered into in 1904, and by provisions on back of notices sent out. It has been many times said that a corporation can only act through its agents, and that general limitations promulgated as to the power of any given agent will yield to the power actually conferred upon him or actually exercised by him with the knowledge and acquiescence of the company. Bona fide restrictions by the company upon powers of subordinate agents should be enforced; but the company should not be permitted to allow the continued disregard thereof until called to account for the acts of the agent and then urge defensively those restrictions. So here, even if the cashiers exceeded their authority, there would be much reason in holding that the society knew and by ratification approved thereof. Numerous authorities are cited bearing upon the powers of agents as to waiving different provisions of life policies. For instance the Harris Case, 94 Tex. 25, 57 S.W. 635, 86 Am.St.Rep. 813, and the Fitzmaurice Case, 84 Tex. 61, 19 S.W. 301, cited by appellant, hold that a mere soliciting agent who takes and forwards the application for insurance cannot waive misstatements as to the applicant's physical condition. In the Fitzmaurice Case it is said that the provision denying the power to any agent "would at least confine the authority to thus act to a general agent or to one acting within the scope of his employment." In the Lewis Case, 187 U.S. 335, 23 Sup.Ct. 126, 47 L.Ed. 204, relied upon by counsel for the company, the application had been taken by Starn as a soliciting agent and sent to the company with Lewis' note for part of the premium, and there was provision that failure to pay the note when due should terminate the contract. Before the note matured, it was sent to Starn for collection, and he, in turn, deposited the note in bank for that purpose. The evidence showed an effort by Starn to collect same after maturity, and this was relied upon as showing a waiver. The court alludes to its previous holdings that a waiver of forfeiture may be inferred from the conduct of the company, and that "courts seize hold of any circumstances that indicate an election or intent to waive a forfeiture"; but says such circumstances must have come from the company or from some agent acting within his authority. As the company had done nothing itself, as distinct from the act of Starns, the court properly makes the case turn on his authority. It is then said that it would be difficult to hold that the mere authority to collect the note gave authority to extend time for its payment or to waive an already accrued forfeiture; but, without expressly so deciding, attention is called to the provision of the policy which denied the power to Starn and also to the contract with Starn, expressly to the same effect, "except in accordance with special instructions from the company in each individual case," and the court had found in effect that there were no such instructions. In concluding it is noted "there is no evidence of any course of dealing of the company or of Starn which enlarged or modified these instructions." There the company showed the provisions of its contract with its agent, and that there were no special instructions. Not so here. And here we have the course of dealing of the cashier in 1905, never objected to or dissented from by the company, so far as the evidence indicates. Without discussing each case in detail, we cite the following authorities as fairly supporting our conclusion, although not exactly analogous in their facts: Northwestern Association v. Findley,29 Tex. Civ. App. 494, 68 S.W. 696; U.S. v. Lesser, 126 Ala. 568,28 So. 646; James v. Insurance Co., 148 Mo. 10, 49 S.W. 978; Insurance Co. v. Lee, 73 Tex. 641, 11 S.W. 1024; Stewart v. Insurance Co.,155 N.Y. 258, 49 N.E. 876, 42 L.R.A. 147; Mayer v. Ins. Co., 38 Iowa 310,18 Am.Rep. 34; Insurance Co. v. Koehler, 168 Ill. 293, 48 N. B. 297, 61 Am.St.Rep. 108; Ins. Co. v. Bowen, 102 S.W. 163. The acts of Cashier Wyman in 1906 will be considered hereinafter, same being of the same general nature as those of Bourke in 1905, and we conclude the jury were authorized to find each within the scope of their authority. But even if they, as such agents, had no authority to delay collection of premiums, or to receive past-due premiums, or to negotiate loans by the company to pay such premiums, or to waive or hold in abeyance a forfeiture, yet we think their course of dealing not without proper probative effect. The company itself admittedly had all such powers. If when the premium came due in March, 1906, its executive officers or any of them thought it best to suspend the forfeiture while an effort should be made to induce Ellis to pay or arrange for payment, they certainly could do so. Now are not the acts and declarations of Wyman in 1906 and of Bourke in 1905 some evidence of such election by the company itself? If my agents are authorized to pursue a given course only in case I have done a certain thing, would not their open pursuit of that course fairly indicate my having done the antecedent thing? The prima facie presumption should be that the agent acts with rather than without authority, and if the principal, when confronted with his agent's acts, is silent, may not the jury conclude that the conditions precedent to the right of the agent to act as he did, in fact, existed? It is, however, urged with much earnestness that there is no evidence of or indicating a waiver or purpose to waive the Forfeiture which the policy declares shall Follow failure to pay promptly. To this *Page 188 contention we cannot assent. It is unquestionably true that the failure to pay the premium when due would, in the absence of any other controlling condition, ipso facto forfeit the policy (Insurance Co; v. Bradley, 98 Tex. 230, 82 S.W. 1031, 68 L.R.A. 509; Insurance Co. v. Manning, 38 Tex. Civ. App. 498, 86 S.W. 620; Insurance Co. v. Reppond, 81 S.W. 1012); but it is just as certainly true that the company could, by its election, avoid that result and keep the policy in force. "It is a familiar rule of law that a party for whose benefit a condition is inserted in a written contract may waive it. In case the provision is that the contract shall cease to have effect or become void for the breach of a condition by one party, the other has the right to elect whether or not he will take advantage of the forfeiture or permit the contract to remain in force." Crescent Co. v. Griffin, 59 Tex. 513; Insurance Co. v. Evans, 136 Ky. 391, 124 S.W. 376; Morrison v. Insurance Co., 69 Tex. 363, 6 S.W. 605, 5 Am.St.Rep. 63; Brady v. Nagle, 29 S.W. 943; Morris v. De Wolf, 33 S.W. 556. And "the rule is now established that a waiver of the forfeiture of a policy in the absence of any agreement to that effect results from negotiations or transactions with the insured after knowledge of the forfeiture, by which the insurer recognizes the continued validity of the policy, or does acts based thereon." 2 Beach, Ins. § 753. The true view, we think, is expressed in Titus v. Insurance Co., 81 N.Y. 419, a case so often cited with approval. It is there said: "When there has been a breach of a condition contained in an insurance policy, the insurance company may or may not take advantage of such breach and claim a forfeiture. It may consult its own interests, choose to waive the forfeiture, and this it may do by express language to that effect or by acts from which an intention to waive may be inferred, or from which a waiver follows as a legal result. A waiver cannot be inferred from its mere silence. It is not obliged to do or say anything to make the forfeiture effectual. It may wait until claim is made under the policy, and then in denial thereof or in defense of a suit commenced therefor allege forfeiture. But it may be asserted broadly that if in any negotiations or transactions with the insured, after knowledge of the forfeiture, it recognizes the policy, or does acts based thereon, or requires the insured by virtue thereof to do some act or incur some trouble or expense, the forfeiture is as matter of law waived; and it is now settled in this court, after some difference of opinion, that such a waiver need not be based upon any new agreement or estoppel. Forfeitures are not favored in the law, and this doctrine of waiver is not peculiar to insurance policies, but is applicable to all cases of forfeiture. As to leases it is thus laid down in Taylor's Landlord and Tenant (5th Ed.) § 287: `The forfeiture of a lease by breach of any condition may, however, be waived in like manner as a forfeiture for nonpayment of rent, or a notice to quit; for if the landlord does any act with knowledge of the breach, which can be considered as an acknowledgment of a tenancy still subsisting, he waives the forfeiture.'" To the same effect, see U.S. Co. v. Lesser, 126 Ala. 568, 28 So. 646; Knarston v. Company,124 Cal. 77, 56 P. 773; Insurance Co. v. Evans, 136 Ky. 391, 124 S.W. 379; Insurance Co. v. Springgate, 129 Ky. 627, 112 S.W. 681, 113 S.W. 824, 19 Ky. Law Rep. 227; Murray v. Insurance Co., 90 Cal. 406, 27 P. 309,25 Am.St.Rep. 133; Washburn v. Company, 143 Ala. 485, 38 South, 1011; Insurance Co. v. Norton, 96 U.S. 235, 24 L.Ed. 689. As said by Chief Justice Fuller in McMaster's Case, 183 U.S. 35, 22 Sup.Ct. 14,46 L.Ed. 71: "The contracts were not assurances for a single year on payment of stipulated premiums, but were entire contracts for life, subject to forfeiture by failure to perform the condition subsequent of payment as provided." So it is here. The policy promises to pay Mrs. Ellis $25,000 on death of her son. That promise was binding on the company, unless it had been in some way released therefrom. When Ellis failed to pay the premium, there accrued at once a privilege, but not a duty, to terminate that promise. Good reasons suggest themselves why the company may not have desired to avail of this privilege. The insured was then in good health, just barely 38 years of age, and the annual premium accruing on the two policies was $1,449. He had been then only recently re-examined and found in good physical condition. On April 19, 1906, Mr. Wyman in writing Mr. Brophy at the home office says: "I am writing you for this information at the request of Mr. Baker, who is very anxious to have the policies kept in force, as they are large policies, and Mr. Ellis is a well known man in this section of Texas." It requires no strong flight of imagination to picture appellant's agents urging upon the more moderate insurer the fact that such a well-known man as Ellis was carrying these large policies with it. To many that would have been perhaps an effective argument, and no one knew this better than the company. The attitude of the company towards Ellis is again suggested in Bourke's letter to him of September 22, 1905, where he advises that the company was "willing to make special concessions in this case" and act "contrary to their rules." This results, says Mr. Bourke, "from the facts which I surrendered to them, according to our correspondence." In addition, there had been most persistent effort upon the part of Cashier Bourke to induce Ellis to arrange for payment of premium, thereby preventing lapsing of the policy in 1905. Under these conditions, when default was made by Ellis in 1906, it was rather to be expected that *Page 189 the company would try to avoid losing the risk. He had already been sent the required notice of the premium to become early due with advice that, unless payment was made on March 24th, the policy would be forfeited and void. No payment being made on that day, the policy was thereafter absolutely void, or else it was an existing live contract. It could not be in force for some purposes and dead for others. It could not maintain a Dr. Jekyl and Mr. Hyde existence. It could not be one thing to-day and another tomorrow. It could not be an existing policy upon which the company was ready to loan money up to the very moment of Ellis' death and then die with him. As stated before, upon default, the company could have permitted the policy to lapse automatically by its own terms. No affirmative act was required upon its part. But did it permit it to lapse? Does not the evidence indicate that it affirmatively held in abeyance the forfeiture, while Ellis was being urged and negotiated with to pay the premium? The jury have said yes, and we are not disposed to override their conclusion. There being no reinstatement involved, if the company after March 24th continued to recognize the policy as existing, it could only mean that it had never ceased to exist, and that, in turn, could only mean that the company had not permitted the lapse. There is no direct evidence as to any consideration of the matter one way or the other, by the officers specifically empowered thereto by the policy. What, if any, correspondence they had with Wyman is not shown, nor could it reasonably be shown, by appellee. But, having concluded that the acts of Wyman and Brophy are the company's acts, we may with propriety refer thereto. It thus appears that on March 30, 1906, Ellis applied to General Manager Baker for a loan on these policies. As indicating the cashier's province, Baker refers the letter to Wyman, who writes Ellis on April 3d. From then continuously to Ellis' death, there is correspondence and negotiation between the two looking to payment of the premium, and the making of a loan for that purpose. It is not practicable to set this out, but a significant fact to be observed is that in no letter, as far as we find, is there any reference to the policy as lapsed, or any suggestion that same would need to be reinstated before a loan could be made thereon. The loan was not to be made, of course, upon a forfeited policy. One of two things necessarily was and is true: Either the policy had never been allowed to forfeit, or else a reinstatement was contemplated. The former conclusion was quite as permissible as the latter. But, if mistaken here, it certainly is true that ordinary minds might differ as to the proper conclusion; wherefore the jury's verdict concludes us. On April 25th, after the policy had lapsed, if it ever did, Mr. Brophy at New York writes Mr. Wyman at Austin as to a proposition of loaning on the policies. Brophy says that, while they are anxious to assist in retaining Ellis' business on their books, yet they cannot make the loan as proposed. In part he writes "that the company could not consider the matter of a loan unless premiums are paid for another full year"; but he says, in substance, the company will loan $575 on each policy by Ellis paying the difference required to complete the third payment. To arrange it that way, he says Ellis must send the difference, along with the policies and necessary loan agreements. There are three things, and only three, prescribed for Ellis as a condition to the loan, that is, send his partial payment, send the policy, and send the loan agreement. No mention of needing any medical examination or reinstatement of the policy; and yet, if there is any virtue in appellant's position that loan could not have been made without reinstating the policy, which must be preceded by the examination. Brophy's letter clearly recognizes the policy as a then existing one. Again, in the very last letter written by Wyman on May 9th, he says to Ellis: "The society is willing to lend you $1,150 on the policies to apply towards the payment of premiums due a short time ago." Here, again, is a distinct recognition of the then existence of the policy. Upon a lapsed policy, there could be no loan, and, if the policy had been forfeited, there were no premiums to pay. If the company had concluded that its best interest would be promoted by holding in suspense the forfeiture while it undertook to arrange with or induce Ellis to pay, then all the acts and correspondence of Wyman and Brophy are intelligible and consistent with each other and with their duty to the company. Looking backward from their conduct, such a conclusion upon part of the company itself is strongly suggested, and it would be bound of its own election as well because responsible for the acts of these agents. It is urged, however, that the evidence falls to show that Ellis would have in fact paid had he lived, and stress is laid upon the last letter written by him on May 2d, wherein he states that the contents of Wyman's letter of May 1st was about what he expected. That letter advised of the failure to induce the home office to agree to a loan upon basis desired by Ellis. It asserts, in effect, that he was not surprised at their action as to that. It does not show that he did not intend to pay the premium. In fact, it proves nothing upon that issue. But, whatever may have been Ellis' intention, it is clear that Wyman did not consider it final, and was not yet ready to abandon the effort to induce Ellis to pay the premium which could only be payable upon assumption that the policies were yet in *Page 190 force. On May 9th Wyman writes Ellis the letter quoted from above. That should have reached Ellis on the 10th. He was then very much pressed with his work, and his failure to reply before the 11th, when he was shot, does not show any cessation of negotiations. As we see it, however, this is not material. Upon the issue of estoppel or a new contract, it might be; but not so as to waiver. Washburn v. Company, 143 Ala. 485,38 So. 1011. If the policy had been forfeited, no recovery could be had thereon. If not, then the original promise to pay upon Ellis' death was in force and effect, and this without regard to what the outcome would have been of the negotiations about the loan. When Mrs. Ellis showed the issuance of the policy and his death, she became entitled to recover. The company answers that, by reason of the failure to pay, it had the right to and did forfeit the contract. The jury finds, in effect, that, while it had the right, it did not exercise the same but, on the contrary, elected not to, and in deference to their verdict we so find. The briefs of counsel in this case indicate great industry. We have patiently examined the many cases cited. It has not been practicable to discuss any considerable number thereof, but, having considered them carefully, our conclusion upon the merits of the propositions urged for reversal are indicated hereinbefore. Those conclusions have not been reached without due appreciation of the merit and force of the positions so earnestly pressed by able counsel for appellant; but the very best judgment of which we are capable leads us to adopt the views urged with equal skill by counsel no less able who have appeared for appellee. In the foregoing discussion, we have covered, not only the principal assignments relied upon, but incidentally others. Each error assigned has been considered, but we find no reversible error shown, and the judgment will be affirmed.