*Pursuant to 5TH CIR. R. 47.5, the court has determined that

this opinion should not be published and is not precedent except

under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

 

No. 97-10427

Summary Calendar

 

GAY LYNN UNDERWOOD; GARY WAYNE

UNDERWOOD,

Plaintiffs-Appellants,

versus

FRANKLIN LIFE INSURANCE COMPANY,

Defendant-Appellee.

 

Appeal from the United States District Court

For the Northern District of Texas

(1:96-CV-132-C)

 

October 27, 1997

Before KING, HIGGINBOTHAM, and DAVIS, Circuit Judges.

PER CURIAM:*

Plaintiffs Gay Lynn Underwood and Gary Wayne Underwood

appeal the take nothing judgment entered against them by the

district court in their diversity action against defendant

Franklin Life Insurance Company. We affirm.

In its findings of fact, the district court determined that

Franklin issued a life insurance policy in 1968, insuring the

life of one James E. Underwood for a face value of $25,000. The
2

policy owner was Citizens National Bank in Abilene, Texas, as

trustee for four trusts set up for Underwood's twin children, Gay

Lynn and Gary Wayne. If it matured as a death claim, the

insurance policy provided that its benefits should be directed to

Citizens National Bank as trustee for the Underwood trusts. The

policy never named James Underwood or the children as either

owners or beneficiaries. The policy provided that its ownership

or beneficiary terms could be altered if the owner filed a new

ownership or beneficiary designation at Franklin's home office.

By 1981, the trusts named in the policy had terminated

naturally. In 1981, 1989, and 1990, Franklin sent Citizens (and

its successors-in-interest) change of ownership and/or change of

beneficiary forms for the policy. Citizens and its successors

never executed these forms. In 1991, Franklin received a letter

from David Hooper, acting as an attorney for James Underwood. 

Hooper enclosed a payment for the policy's annual premium and he

requested a change of ownership form; Franklin then requested

additional information from Hooper so that Franklin could prepare

the forms, but Hooper never responded.

On March 15, 1994, Hooper informed Franklin that James

Underwood had died on April 10, 1993. Knowing that the trusts

had terminated, on March 23, 1994, Franklin informed Hooper that

Franklin was going to pay the insurance benefits to James

Underwood's estate. Hooper responded by letter dated March 24,
3

1994, in which he acknowledged the reasons for payment and the

payee and he provided Franklin with Letters Testamentary in which

Leonard Underwood was appointed Executor of the Estate of James

Underwood. On March 29, two weeks after it was notified of

Underwood's death, Franklin sent Hooper a check for $25,000,

payable to Leonard Underwood. The check was cashed on April 6,

1994.

On May 16, 1994, Franklin received a letter from plaintiff

Gay Lynn Underwood demanding payment of the insurance policy to

herself and her brother. The letter was prepared by David

Hooper, the same attorney who had just received the $25,000 on

behalf of James Underwood's estate. The district court found

that the proceeds of the policy had been paid by Franklin to

Underwood's estate with full knowledge of the plaintiffs. 

Nevertheless, the plaintiffs sued Franklin, claiming they were

entitled to the insurance benefits and that Franklin should pay

out the benefits a second time.

The district court concluded that the plaintiffs were

entitled to no damages under the relevant Texas statutes for

Franklin's payment of the insurance benefits to the estate rather

than the plaintiffs. Alternatively, it held that the plaintiffs'

claim was barred by the doctrines of waiver, estoppel, and laches

because of their effective ratification of Franklin's payment to

the estate. Following trial, as per the district court's order,
4

the independent executor entered into a stipulation, dividing the

$25,000 equally between Gay Lynn and Gary Wayne Underwood.

We find that the district court did not abuse its discretion

in awarding no damages to the plaintiffs based upon Franklin's

conduct. Franklin acted reasonably in this situation. It

repeatedly attempted to secure a change of ownership or

beneficiary for the insurance policy. Because the owner of the

policy never complied, Franklin was faced with the prospect of

paying insurance proceeds to a non-existent beneficiary. 

Instead, it followed the sensible course of forwarding the

proceeds to the estate of the insured. Cf. Higgins v. McElvee,

680 S.W.2d 335, 342 (Mo. App. 1984).

In no way were the plaintiffs legally entitled to direct

payment by Franklin of the proceeds. The insurance policy

contained a provision requiring that any change of beneficiary be

secured by a written request to Franklin. No such request having

been made, the plaintiffs were not official beneficiaries of the

policy. Such change-of-beneficiary provisions in insurance

contracts are binding on the courts. See Teaff v. Ritchey, 622

S.W.2d 589, 593 (Tex. App.--Amarillo 1981, no writ).

Plaintiffs claim damages from Franklin for violation of the

prompt payment statute of the Texas Insurance Code. Tex. Ins.

Code art. 21.55(6). The prompt payment statute, however,

provides for damages when an insurer fails to pay on a claim made
5

by an insured, a policyholder, or a beneficiary of the policy. 

As the plaintiffs were neither the insured, policyholders, nor

beneficiaries, they have no redress under the statute.

Finally, as the district court found, the plaintiffs had

full knowledge that Franklin was to pay the proceeds to James

Underwood's estate. Yet they made no effort to prevent Franklin

from doing so. Rather, by allowing their attorney to deliver the

proceeds of the policy to the executor, the plaintiffs ratified

Franklin's actions. Their claims for damages are barred by the

doctrines of ratification, estoppel, and waiver. See, e.g.,

Southwestern Investment Co. v. Alvarez, 442 S.W.2d 862, 866 (Tex.

Civ. App.--El Paso 1969, reformed by deleting punitive damages

and affirmed, 453 S.W.2d 138 (Tex. 1970)) (estoppel); Ford v.

Culberson, 308 S.W.2d 855, 864-65 (Tex. 1985) (waiver); Branham

v. Prewitt, 636 S.W.2d 507, 512 (Tex. App.--San Antonio 1982,

writ ref'd n.r.e.) (ratification). Nor do plaintiffs deserve any

attorneys' fees.

AFFIRMED.