Case Name: MISSOURI STATE LIFE INS. CO. v. RHYNE et al.
Court: Texas Courts of Civil Appeals
Jurisdiction: Texas
Decision Date: 1925-02-14
Citations: 276 S.W. 757
Docket Number: No. 10925
Parties: MISSOURI STATE LIFE INS. CO. v. RHYNE et al.
Judges: 
Reporter: South Western Reporter
Volume: 276
Pages: 757–764

Head Matter:
MISSOURI STATE LIFE INS. CO. v. RHYNE et al.
(No. 10925.)
(Court of Civil Appeals of Texas. Fort Worth.
Feb. 14, 1925.
Rehearing Denied April 11, 1925.
Second Rehearing Denied May 23, 1925.)
Garnett & Garnett and W. O. Davis, all' of Gainesville, for appellant.
J. M. Donald, of Bowie, for appellees.
writ of error granted November 4, 1925.

Opinion:
DUNKLIN, J.
The Missouri State Life Insurance Company has appealed from a judgment by default rendered against it in favor of W. H. Rhyne and Mary H. Rhyne for the face value of two life insurance policies, with the statutory penalties and attorneys' fees added. The policies were issued to Elmus H. Rhyne, and dated February S, 1922.
The judgment by default was based on plaintiffs' original petition. In the petition plaintiffs' residence was alleged to be in Montague county, Tex., where the suit was filed and tried. It was further alleged that:
"The defendant, the Missouri State Life Insurance Company is a life insurance corporation with its home office in St. Louis, Mo., but the said defendant life insurance company has in all things complied with the laws governing the manner of transacting insurance business within the state of Texas, and John M. Scott, Austin, Tex., commissioner of insurance for the state of Texas, is the attorney for service on said defendant company."
On that petition a citation was issued on September 28, 1923, directed to the sheriff or any constable of Travis county, Tex., commanding him to summon the defendánt to appear at the next regular term of said court, to be holden on the third Monday in October, 1923, which was the 15th day of October, to answer the plaintiffs' petition by delivering a copy of the citation, and the accompanying* certified copy of plaintiffs' petition, to John M. Scott, commissioner of insurance, Austin, Tex., attorney for service for the defendant company.
The citation was in statutory form, and was served on the commissioner of insurance on October 1, 1923, more than 10 days before the beginning of the term. On October 3, 1923, the commissioner of insurance mailed to the defendant at its home office in St. Louis the citation and copy of plaintiffs' petition, which had been served on him, and those documents were received by the defendant on October 5, 1923, 9 full days before the first day of the return term of court.
On October 15th the court convened, and on that day the judge of the court entered a memorandum order on his docket reading, "Passed for appearance day," which was October 16th. On the 18th day of October, which was 12 full days after defendant had received the citation at its home office in St. Louis, Mo., the court rendered judgment by default, and, upon proof offered, against the defendant for the sum of $5,000, the aggregate face value of the two policies. sued on, together with $1,250' attorneys' fdes and $600 statutory penalty, making in all $6,850. A memorandum of the judgment was by the judge entered on his docket on October 18th, but the judgment was not actually entered in the minutes of the court until November 10th, it being the custom of the court that judgments rendered could, be entered in the minutes of the court at any time before adjournment for the term.
The agent of defendant who received the citation at its home office on October 5th placed it on the desk of one of its attorneys who was then absent from the city, and the same did not come to his notice until October 20th, when he returned home. He immediately wired to Messrs. Garnett & Gar-nett, practicing attorneys in Gainesville, Tex., requesting them to take steps to save a default judgment against the defendant. Those attorneys at once .made inquiry by phone to Montague, the county seat, to learn the status of the case, and were erroneously informed that no default judgment had been taken, and they did not learn of that error until October 23d, and on the following day a motion to set aside the judgment was prepared and mailed to the clerk of the court, who received and filed it October 25th, the motion being prepared by Hon. W. O. Davis upon request of Messers. Garnett & Garnett. On October 30th, an amended motion was filed, to which was attached affidavits setting out the facts above recited as to when defendant received the citation, why answer was not filed before the default, and the steps taken to have the default set aside, also a meritorious deféhse to the suit.
' Upon a hearing of the motion and the attached affidavits, which were introduced in support thereof, the same was overruled, and from that order an appeal was taken.
Among the findings of fact filed by the trial judge is one that 12 full days elapsed between the date defendant received the citation in its home office and the date the default judgment was rendered, and that defendant was guilty of negligence in failing to file an answer within that period. That finding has sufficient support in the affidavits referred to, and we cannot disturb it.
We are of the opinion, further, that the service of citation in the manner and for the length of time noted was sufficient to furnish a proper basis for the judgment rendered, if the same had been returned to the clerk on or before the first day of the return term, as required by the statutes. Article 1867 of the Revised Statutes requires service of citation on a defendant for at least 10 days before the first day of the return term of court, exclusive of the days of service and return in order to compel the defendant to answer to that term. By article 1934, the second day of court is made the appearance day. Under article 1935 it is the duty of the court to call cases on the docket on the appearance day; and under provisions of article 1936 plaintiff may take judgment by default on the appearance day or on any subsequent day of the term "against any defendant who has been duly served with process, and who has not previously filed an answer."
By article 4761 a certificate of authority from the insurance commissioner to do insurance business in the state is required of foreign and domestic companies; and article 4773 provides that such a company shall file with the insurance commissioner a power of attorney appointing him its agent and attorney in fact, to be served with citation or to accept service in any suit against it in the state.
Article 4774 reads:
"Whenever the commissioner of insurance and banking of this state shall accept service or be served with citation in any suit pending against any life insurance company in this state, as provided by the preceding article, he shall immediately inclose the copy of the citation served upon him, or a substantial copy thereof, in a letter properly addressed to the general manager or general agent of the company against whom such service is had, if it shall have a general manager or general agent within this state, and if not, then to the home office of the company, and shall forward the same by registered mail, postage prepaid; and no judgment by default shall be taken in any such cause until after the expiration of at least ten days after the general agent or general manager of such company, or the company at its home office, as the case may be, shall have received such copy of such citation; and the presumption shall obtain, until rebutted, that such notice was received by such agent or company in due course of mail after being deposited in the mail at Austin."
The provision in article 4774, that "no judgment by default shall be taken in any such cause until after the expiration of at least ten days after the general agent or general manager of such company, or the company at its home office, as the case may be, shall "have received such copy of such citation," is not necessarily repugnant to article 1867, which provides that:
"In order to compel the defendant to plead at the return term of the court, the citation must be served at least ten days before the first day of such return term, exclusive of the days of service and return."
Service upon the insurance commissioner 10 days before the first day of the return term, and the forwarding by the commissioner of the citation to the home office of defendant and the receipt by the company of it there 10 days before default judgment was taken, was service in compliance with the provisions of both articles before default was taken.
After service of the citation on the insurance commissioner, the sheriff who executed it and made his return thereon showing service mailed it to counsel for plaintiff, who did not file it with the clerk of the court until several days after the default judgment was taken. However, he exhibited it to the court at the time he presented the case. The clerk of the court was the proper person to whom the writ should have been returned, or, at all events, to whom it should have been delivered immediately after plaintiffs' counsel received it, and on or before the return day.
Whether the failure to return the, citation to the clerk on or before the first day of the term, or at least on the day the judgment by default was rendered, would of itself render the judgment invalid on this appeal, in view of the decisions to the effect that all statutory requirements relating to service must be strictly followed in order to sustain a default judgment, we shall not determine, since we have concluded that the judgment should be reversed on other grounds hereinafter shown. Some of the decisions referred to are such as Durham v. Betterton, 79 Tex. 223, 14 S. W. 1060, and Crenshaw v. Hempel, 60 Tex. Civ. App. 385, 130 S. W. 731, holding that the omission of the' file number of the suit from the body of the citation, and Le Master v. Dalhart Real Estate Agency, 56 Tex. Civ. App. 302, 121 S. W. 185, holding the omission from the citation of the date the suit was filed, are each fatal to a default judgment upon appeal therefrom. However, in this connection, we think it proper to say that such, a departure from a compliance with the plain statutory requirements, to say the least, should not be encouraged.
It was alleged in the petition that plaintiffs had agreed to pay to their counsel 25 per cent, of the recovery as an attorney's fee, which was a reasonable fee for his services and for which defendant had become liable on account of its failure to pay the policies after proof of death made, and judgment was sought for $1,250 on that account, in addition to the sums stipulated in the policies. Under such circumstances, the trial judge, who was a brother to plaintiffs' counsel, was not disqualified to try the case by reason of such relationship. Winston v. Masterson, 87 Tex. 200, 27 S. W. 768; Patton & Wellborn v. Collier, 90 Tex. 115, 37 S. W. 413.
It is a familiar rule that a default of the defendant is equivalent to an admission of the truth of all material facts alleged in the petition; and if all the facts are alleged which are required to be proven in order to support a recovery, the default judgment will be sustained. On the contrary, if the petition fails to state any of those material facts, the judgment by default will he reversed on appeal or writ of error prosecuted therefrom. Wood v. City of Galveston, 76 Tex. 126, 13 S. W. 227; Colbertson v. Beeson, 30 Tex. 76; Malone v. Craig, 22 Tex. 609; Seastrunk v. Pioneer Savings Ass'n (Tex. Civ. App.) 34 S. W. 466; Thigpen v. Mundine, 24 Tex. 282; Maddox v. Craig, 80 Tex. 600, 16 S. W. 328; Texas Auto & Supply Co. v. Magnolia Petroleum Co. (Tex. Civ. App.) 191 S. W. 573, and other decisions tberel cited; 34 Corpus Juris, pp. 153, 175.
Tested by that rule, plaintiffs' petition was insufficient to support the judgment by default. That portion of the petition which sets out the', two policies sued on is as follows:
"These plaintiffs would represent that on February 8, A. D. 1922, the defendant life insurance company did execute for a consideration to it in hand paid by Elmus H. Rhyne, two certain life insurance policies, described as follows, to wit:
"First. A certain insurance ' policy, No. 384761, dated February 8, A. D. 1922, issued by said defendant insurance company, payable to Selma F. Rhyne, as beneficiary, being in the amount of $2,060, conditioned that upon the death of the said Elmus H. Rhyne, who in error in said policy was styled and named as Elmers H. Rhyne, said amount of money would be paid to the said beneficiary or to any beneficiary thereinafter named.
"Second. A certain insurance policy, executed by said defendant company upon the life of Elmus H. Rhyne (Elmers H. Rhyne), No. 3§4762, dated February 8, A. D. 1922, in the 'principal sum of $3,000, conditioned that upon, the death of the said Elmus H. Rhyne (Elmers H. Rhyne), the said amount provided in said policy would be paid to the said beneficiaries."
Neither in the preceding nor subsequent portions of the petition were plaintiffs referred to as "beneficiaries," although they were alleged to be father and mother of the insured. In another paragraph of the petition it was alleged that the first policy was so changed as to be made payable to the plaintiffs. In another paragraph it was alleged that during the insured's illness plaintiffs paid the premiums on both policies, but there was no allegation in the. petition that the defendant ever undertook and agreed to pay the second policy to the plaintiffs, nor wore any specific facts alleged from which such an obligation would be implied. In fact, there is an absence of any allegation of the names of the "beneficiaries" of the second policy. Manifestly, the petition did not show a right in plaintiffs to recover upon the second policy.
In Colbertson v. Beeson, 30 Tex. 76, the following was said by Justice Moore:
"The execution and delivery of the note to the payees is distinctly averred in the petition; but it is not alleged that the plaintiff, Beeson, is either the bearer or owner of it, or in any way connected with or entitled to enforce the liability created in favor of the payees by the execution and delivery of the note to them. It is unquestionably an elementary principle, that the liability of the defendant to the plaintiff, on the cause of action for which the suit is brought, must be distinctly averred. It is not sufficient to show a right of action in favor of other parties, which, as a matter of inference, it may be supposed the plaintiff is entitled to assert."
The following is another paragraph in plaintiffs' petition:
"These plaintiffs would represent that within a short time after his death, these plaintiffs, through their attorney, J. M. Donald, Bowie, Tex., wrote the Missouri State Life Insurance Company, ' St. Louis, Mo., a letter informing said company of the death of the said Elmus H. Rhyne, and asked that payment be made under the provisions of the said two policies executed by said company as hereinbefore alleged, and requested that proof of death be duly forwarded unto these plaintiffs.')
In succeeding paragraphs plaintiffs alleged that more than 60 days had elapsed since the writing of that letter by plaintiffs' counsel, and that no response had been received from the defendant company to that letter, and by reason of its failure to pay the policies in accordance with that demand the defendant had become liable to plaintiffs for $1,250 attorney's fees, and for 12 per cent, of the face value of the policies, or $600, as a statutory penalty, in addition to the sum of $5,000, tl\e aggregate of the face value of the two policies. There was no allegation that the defendant had actually received such notice.
If the defendant had answered and the case had been tried, proof by plaintiffs that their attorney had written such a letter to the defendant would not have been admissible as prima facie evidence of the receipt of the notice of the death of the insured, and of the demand for payment of the policies, without further proof that the letter so written had been duly stamped, properly addressed, and deposited in the United States mail, or else delivered by some one in person. Hence the allegation in the petition of the mere writing of the letter would not support a default judgment for the attorney's fee and the penalty** and for which a recovery was awarded. Recovery of penalties or attorney's fees was based upon the statutes of Texas, giving the right thereto if an insurance company refuses payment of the policy which it justly owes. Article 4746, Revised Statutes.
The petition did not allege that the policies were delivered to the insured in Texas, and that they thereby became contracts governed by the laws of this state. Appellant insists that it appears inferentially that the policies were delivered to the insured in the state of Oklahoma, where he then resided, and that therefore they were Oklahoma con tracts, and that article 4746 of our statutes would not be applicable thereto. In support of that contention, the appellant has cited Ætna Life Ins. Co. v. Duncan, 266 U. S. 389, 45 S. Ct. 129, 69 L. Ed. 342; Cravens v. New York Life Ins. Co., 148 Mo. 583, 50 S. W. 519, 53 L. R. A. 305, 71 Am. St. Rep. 628; W. U. Tel. Co. v. Smith (Tex. Civ. App). 188 S. W. 702; 17 Corpus Juris, 719.
Whether or not plaintiffs' petition is subject to that interpretation, and, if not so, whether or not, in the absence of an allegation as to where the contracts of insurance were consummated, the presumption would be indulged that the laws of any state other than Texas, in which the policies were delivered, are the same as the laws of Texas on the same subject, we shall not undertake to determine, since the case is to he reversed on other grounds hereinbefore noted.
For the reasons noted, the judgment is reversed, and the cause is remanded.