Case Name: AMERICAN NAT. INS. CO. v. TABOR
Court: Supreme Court of Texas
Jurisdiction: Texas
Decision Date: 1921-04-20
Citations: 230 S.W. 397
Docket Number: No. 2851
Parties: AMERICAN NAT. INS. CO. v. TABOR.
Judges: 
Reporter: South Western Reporter
Volume: 230
Pages: 397–400

Head Matter:
AMERICAN NAT. INS. CO. v. TABOR.
(No. 2851.)
(Supreme Court of Texas.
April 20, 1921.)
1. Courts <&wkey;247 (5) — Supreme Court authorized to answer question certified by Court of Civil Appeals in case of which it has final jurisdiction.
Under Rev. St. art. 1620, the Supreme Court has authority to answer a question certified by the Court of Civil Appeals, under article 1619, as one which such court deems it advisable to present, though the case in which the question arises falls within the final jurisdiction of the Court of Civil Appeals.
2. Insurance <&wkey;400 — Attempted reservation of right to interpose fraud by way of defense after policy issued more than two years void.
Parties to a life insurance contract could not by contract put something into the policy repugnant to Rev. St. art. 4741, subd. 3, requiring policies to be made incontestible not later than two years from date except for nonpayment of premiums, etc., and thus destroy a benefit to insured which the statute was designed to guarantee, so that an attempted reservation by the insurer of right to interpose fraud by way of defense to a suit to enforce payment of the policy after it had been issued more than two years was void. •
3. Insurance <&wkey;5l7 — Where age not understated, policy did not authorize reduction in amount payable.
Where a life insurance policy did not understate the age of insured, though the premium was based on a lower age, there was nothing in its terms to authorize a reduction in the amount payable to the beneficiary, despite the policy provision that, if the age of insured was not correctly stated therein, no greater amount should be paid than the premium would have purchased at the true age.
4. Insurance <&wkey;> 133(1) — Insurers bound by modifications of contract voluntarily made less to their advantage than authorized.
While it is not within the power of life insurance companies in placing policies in certain forms on the market materially to change or evade the obligations imposed on them by statute for the protection and advantage of insured and their beneficiaries, such companies are bound by modifications of the contract which they have voluntarily made, and which have no effect other than to leave clauses authorized for their own benefit somewhat less to their advantage than would be permissible under the Statutes, as Rev. St. art. 4741, subd. 5.
5. Insurance &wkey;G38(2) — Policy issued at premium rate for age less than that of insured violates prohibition against discrimination, but may be enforced by beneficiary.
A life insurance policy issued in Texas to one aged 64 years at the premium rate for one aged 48 years violates the provision of Rev. St. art. 4954, against discrimination between policy holders, but may be enforced by the beneficiary; insured not being regarded as in pari delicto with insurer, in view of article 4741 and White’s Ann. Pen. Code 1911, art. 416c.
6. Contracts <&wkey;l39 — Penalty upon one party only indicates parties not in pari delicto.
It is safe to assumfe that whenever the statute imposes a penalty upon one party and none upon the other, they are not be regarded as in pari delicto.
7. Contracts &wkey;?l3¡9 — Equity will not refuse to enforce contract inhibited, but not declared void, if parties not equally at fault.
A court of equity will not withhold relief' where it is necessary in the interests of justice or sound public policy to enforce a contract which is inhibited by statute, but not declared void, and not otherwise open to attack, provided the parties are not in pari delicto, and he who is least culpable seeks relief.
Certified Question from Court of Civil Appeals of Second Supreme Judicial District.
Action by Mrs. Kate Tabor against the American National Insurance Company. From judgment for plaintiff, defendant appealed to the Court of Civil Appeals, which affirmed, and certifies a question to the Supreme Court. Question answered for plaintiff in accordance' with the opinion.
Lattimore, Cummings, Doyle & Bouldin, of Fort Worth, for appellant.
Martin & Smith and W. O. Prewitt, all of Fort Worth, for appellee.

Opinion:
GREENWOOD, J.
The facts stated in the certificate of the honorable Court of Civil Appeals may be summarized as follows:
Appellant issued a policy of insurance on the life of Edward L. Tabor for $210, payable to appellee, his wife, bearing date March 6, 1911. The policy stipulated for weekly payments of premium in the sum of 25 cents each. The age of Edward L. Tabor was shown on the face of the policy as 64 years.
According to appellant's insúranee rates, a weekly premium of 25 cents would purchase insurance in the sum of $210 upon the life of a person at the age of 48 years, and would purchase insurance in the sum of only $85 upon the life of a person at the age of 64 years. The correct age of Edward L. Tabor was 64 years.
The policy contained these stipulations:
"If the age of the insured is not correctly stated herein no greater amount will be paid than the premium, herein would have purchased at the true age."
"This policy shall be incontestable after two years from its date of issue for the amount due provided premiums have been duly paid, except for fraud."
Edward L. Tabor died on April 2, 1913, having paid all installments of premium on his policy at the rate of 25 cents per week.
Appellee sued appellant to recover the insurance of $210, besides interest, penalty, and attorney's fee.
Appellant tendered $85 in discharge of its obligation under the policy, averring that Edward L. Tabor had stated his age to be 48 years in his application for insurance; that the policy was issued by appellant in reliance on that statement; that the policy, as issued, showed the age of Edward L. Tabor to be 48 years; and that the policy was afterwards fraudulently changed in such a , way as to show the insured's age to be 64 years.
In replication to the facts set up by appellant, appellee pleaded that appellant knew when it issued the policy and when it accepted premium payments that the policy showed Edward L. Tabor to be 64 years of age, and that the policy was incontestable on any ground relied on by appellant at the date of the death of the insured.
The case was tried by a jury, who returned a special verdict to the effect that the age 64 was written in the policy when it was delivered by appellant's agent to the insured, that the jury did not know whether the insured's age was stated to be 48 years in the application on which the policy was issued, and that the age of the insured was not understated in the policy.
The trial court rendered judgment for ap-pellee against appellant for $210, interest, penalty,' and attorney's fee. The Court of Civil Appeals first reformed the judgment of the trial court so as to allow appellee to recover only $85. On rehearing the trial court's judgment was affirmed, Associate Justice Dunklin dissenting.
As we construe the certificate, the question propounded to us is: Had the policy become incontestable for $210 irnder subdivision 3 of article 4741 of the Revised Statutes, or was the policy unenforceable for any greater amount than the premiums paid would have purchased at the insured's true age, by reason of the prohibition in article 4954 against discrimination among policy holders in charges for insurance?
Appellee filed a motion to dismiss the certificate upon the ground that article 1620 of the Revised Statutes did not authorize the Court of Civil Appeals to certify a point of dissent in cases of which that court was given final jurisdiction. The motion was overruled, because we were advised by the Court of Civil Appeals that the question of law which was certified was one which the court deemed it advisable to present, under article 1619, to the Supreme Court for its adjudication. Our authority to answer such a question is established by the settled construction of the statutes, though the case in which the question arises falls within the final jurisdiction of the Court of Civil Appeals. Wallis v. Stuart, 92 Tex. 572, 50 S. W. 567.
Among the provisions which the Legislature has required to be substantially included in policies of life insurance to be issued or delivered in this state, or to be issued by life insurance companies organized under the laws of the state, are:
"3. A provision that the policy, or policy and application, shall constitute the entire contract between the parties and shall be incontestable not later than two years from its date, except for nonpayment of premiums; and which provision may or may not, at the option of the company, contain an exception for violations of the conditions of the policy relating to naval and military services in time of war.
"5. A provision that, if the age of the insured has been understated, the amount payable under the policy shall be such as the premium paid would havp purchased at the correct age."
R. S. art. 4741.
The policy before us departs from subdivision 3 in that it allows the insurer to contest same for fraud, after two years, though all premiums have been/ paid. It was the obvious purpose of subdivision 3 to prescribe two years as a maximum period of limitation, after which no defense should /be allowed to defeat payment of the policy, except nonpayment of premiums, or violations of conditions relative to naval or military services during war. The subdivision allows 'the insuring company to fix a period of time, not to exceed two years, during which it may make fully available to itself all the legal consequences of fraud which ought to be discovered through the exercise of proper diligence; but, after the expiration of the period fixed, the subdivision eliminates all defenses, save those specially mentioned.
The parties could not, by contract, put something into the policy which was repugnant to the mandatory statute, and thus destroy a benefit to the insured which the statute was designed to guarantee. Hence the attempted reservation by the insurer of the right to interpose fraud by way of defense to a suit to enforce payment of the policy after it had been issued more than two years was void.
If the policy had accurately followed subdivision 5 of article 4741, this case might be determined on different considerations than those which must control in answering the certified question. Subdivision 5 authorized the insertion in the policy of a provision reducing the amount payable thereunder to what the premium paid would have purchased at the true age of the insured, if such age had been understated. The jury found that they did not know whether the insured had understated his age, and also found that there was no understatement of age on the face of the policy. The policy provides for a reduction in the amount of the insurance only in the event the age of the insured was not correctly stated therein. Hence, according to the jury's finding that the policy did not understate the age of Edward L. Tabor, there was nothing in the terms of the policy to authorize a reduction in the amount payable to appellee.
The Legislature has not prescribed standard forms for policies. It has, instead, allowed each company to place on the market such forms of policies as it may desire, on being filed or approved by the Insurance Commissioner, provided only that such forms shall not carry certain provisions and shall "substantially" contain certain other provisions. While it is not within the power of insurance companies, in placing policies in pertain forms on the market, to materially change or evade the obligations imposed on them, by statute, for the protection, and advantage of the insured and of their beneficiaries, yet we believe the insurance companies are bound by modifications of the insurance contract whieh they have voluntarily made, and which have no other effect than to leave clauses authorized for their own benefit somewhat less to their advantage than would be permissible under the statutes. N. Y. Life Insurance Co. v. Hardison, 199 Mass. 194, 195-, 85 N. E. 410, 127 Am. St. Rep. 478; Life Ins. Co. v. Com'r of Insurance, 151 Mich. 615, 115 N. W. 707; 1 Joyce on Insurance (2d Ed.) § 194 (g). Appellant therefore failed to show itself entitled to defeat or reduce appellee's demand by reason of any understatement of Edward L. Tabor's age, not appearing in the policy, after the policy had been in force more than two years, unless it did so by virtue of the operation of article 4954 of the Revised Statutes.
Article 4954 forbids any insurance company doing business in Texas to make or permit any discrimination in favor of one person against others with respect to premiums charged for life insurance. Any company or agent violating the article is guilty of a misdemeanor and is subject to punishment by fine under article 416c, White's Penal Code. As additional penalty, the company's certificate of authority to do business in the state and the agent's license for one year may be forfeited.
It is the contention of appellant that the effect of article 4954 is to render void, or at least unenforceable for its full amount, a life insurance policy, issued in this state, to one aged 64 years, at the premium rate for one aged 48 years. Such a policy contract does contravene the prohibition against' discriminations between policy holders; but it does not necessarily follow that the courts will adjudge it void or refuse to enforce it. The effect of the statute on the forbidden contract depends on the legislative intent.
The statute does not denounce as void any policy which violates its terms. The expressly declared consequences of infractions of the statute appear to be ample to secure its obedient observance. The Supreme Court of- the United States was of the opinion that, where this was true, it was the reasonable implication that the Legislature meant for only the statutory remedies to be applied, and it did not mean for courts to refuse to enforce, corttracts which were not declared void or unenforceable, though in contravention of the statute. Harris v. Runnels, 12 How. 79, 13 L. Ed. 901.
The language of the statute shows that the Legislature did not regard the insured and the insurer as in pari delicto in making the contracts sought to be prevented. The insurer and the insurer's agents are alone to be punished, and are alone expressly subjected to forfeiture. The command to refrain from the discriminatory acts is addressed to 'the insurance companies alone.
We sanction the declaration of Judge Selden, quoted with approval in a later opinion of the New York Court of Appeals, that —
"It is safe to assume that whenever the statute imposes a penalty upon one party and none upon the other, they are not to be regarded as par delictum." Tracy v. Talmage, 14 N. Y. 162, 67 Am. Dec. 145; Irwin v. Curie, 171 N. Y. 409, 64 N. E. 161, 58 L. R. A. 832.
It would not be in accord with either the public policy declared by the act wherein the statute is found or the ends of justice to permit insurance companies to issue discriminatory policies of life insurance and collect and retain the premiums thereon and to then refuse payment after the death of the insured.
The rule is established that a court of equity will not withhold relief where it is necessary in the interest of justice and "of sound public policy to enforce a contract which is inhibited by statute, but is not declared void and is not otherwise open to attack, provided the parties are not in pari delicto, and he who is least culpable seeks relief. 1 Pomeroy's Equity Jurisprudence (3d Ed.) § 403.
A legislative purpose to have article 4954 render discriminatory policies void is conclusively negatived by the provisions of article 4741, being a subsequent section in the same act, declaring the policy incontestable after two years on such a ground, and authorizing the insurer to insert a clause in the policy whereby the amount payable might be reduced to conform to that rightly purchasable by the premiums paid.
It seems to us that the clear intent of the law is accomplished by visiting upon the insurer or agent who violates article 4954 the punishment and penalty there prescribed; and by requiring the reduction* specified in subdivision 5 of article 4741, when the insurer has availed himself of the authorization to write the stipulation therefor into the policy; and by upholding the validity of the policy which may have prevented the insured from making other provision for his dependents in the event of death.
It is not necessary, in answering the certified question, to determine what may be the right of the insurer, sustained in some decisions, such as Rideout v. Mars, 99 Miss. 199, 54 South. 801, 35 L. R. A. (N. S.) 485, Ann. Cas. 1913D, 770, and Am. Nat. Ins. Co. v. Brown, 179 Ky. 711, 201 S. W. 328, to recover the difference between the premiums collected and the premiums chargeable at the true age of the insured.
In the case of Laun v. Pacific Mutual Life Ins. Co. of Cal., 131 Wis. 555, 111 N. W. 660, 9 L. R. A. (N. S.) 1204, the Supreme Court of Wisconsin determined that the granting of a rebate did not invalidate a life insurance policy under a statute of very similar terms to article' 4954. The opinion in that case contains an elaborate review of the authorities and is most convincing.
We answer that on the facts certified article 4954 did not prevent the enforcement of the policy for its full amount.
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