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(248 S.W.)
such condition until she died on May 21, 1919. , certificate should be delivered to her in per-
A jury was waived, and the court rendered a son, and was not misled by the conduct of
judgment in fåvor of Hubbard for $500. plaintiff in error. It is insisted that "with-

[1] We do not think the pleadings of de- out ignorance there could be no misleading of
fendant in error, as aided by the answers, the party, for, if he knew the facts, he could
were open to attack through a general demur- not be misled or deceived by another.” The
rer. Every intendment of the pleader must law as to estoppel by waiver is ignored, in
be read into the petition, and under that rule which case no representation is necessary, but
the petition, as aided by answer, is good the estoppel is complete when by the course
against general demurrer. There was an al- of conduct of one party to a contract entitled
legation that a certain policy of insurance to the performance of certain terms or condi-
was delivered by plaintiff in error to Mrs. tions thereof the other party has been led to
Hubbard, whereby, for the considerations believe that a performance will not be re-
therein named, the life of assured was insur- quired until it is too late to perform, and to
ed for $500 with defendant in error as the insist on performance would result in injus-
beneficiary; that the assured had died, and tice. This kind of estoppel, unlike that by
the amount of the policy was due and unpaid, misrepresentation, does not rest upon ignor-
and any matters lacking in the petition are ance of the facts by the party entitled to the
supplied by the answer, in which the policy is benefit of it. As said by the Supreme Court
attacked upon the ground alone that the cer of the United States in N. Y. Ins. Co. v. Eg-
tificate was not delivered to deceased while gleston, 96 U. S. 572, 24 L Ed. 841:
she was in good health. There is no claim

"Any agreement, declaration, or course of that all other conditions were not complied action, on the part of an insurance company, with. In the supplemental petition, which which leads a party insured honestly to bewas in effect an amendment, full allegations lieve that by conforming thereto a forfeiture were made as to conditions in the certificate of his policy will not be incurred, followed by and the allegations in the answer fully met. due conformity on his part, will and ought to The allegations in the supplemental petition estop the company from insisting upon a foralso meet all of the special exceptions, and feiture, though it might be claimed under the the first, second, third, fourth, and fifth as

express letter of the contract." signments of error are overruled.

In this case the facts show that the cer(2) The sixth assignment is a combination tificate was delivered by plaintiff in error in of seven assignments, which, according to the absence of his wife in Mexico, and, acting plaintiff in error, "are all there grouped to for his wife, defendant in error paid the dep gether and submitted as one assignment of uty or agent of plaintiff in error all dues de error.” Probably, as stated by plaintiff in er- manded. No objection was made to making ror, all of them either directly or indirectly the delivery of the certificate to defendant in assail the defense of estoppel interposed by error, nor any inquiries made about Mrs. defendant in error, as to the delivery of the Hubbard. The constitution and by-laws were certificate. It is contended by plaintiff in er never delivered. There is no evidence tendror that, under the terms of the constitution ing to show any tubercular affection of Mrs. and laws of the society, the certificate was Hubbard when the application for insurance not valid and binding unless delivered by the was made, nor even when she died is it satsociety to Mrs. Hubbard, while defendant in isfactorily shown that she had tuberculosis. error contends that the society knew when There was nothing in the certificate to indiapplication was made for the policy that Mrs. cate that the certificate should be delivered to Hubbard intended to visit Mexico, that it de

the insured in person, and, while it is indilivered the certificate without protest or no-cated therein the the constitution and bytice to defendant in error, accepted payment laws were a part thereof, no copies of such of dues from him, and made no objection on constitution and by-laws were furnished the the ground of the absence of the wife nor assured or beneficiary. The evidence supcalled his attention to any requirement that ports an estoppel against plaintiff in error. the certificate could be delivered only to her,

[3] It is the contention, however, of plainand that the society is therefore estopped to tiff in error, that, as it was not shown that deny its liability because of failure to deliver the Sovereign Commander or Sovereign Clerk the certificate to the assured. Setting aside had waived delivery of the certificate to the all claims that neither defendant in error assured, the waiver was not effective. It was nor his wife knew of the provision as to de not pleaded that the commander or clerk did livery of the certificate, the sole question to not sign a waiver, and there was no plea upon be considered is: Did the society estop itself which to base testimony that they did not by its conduct from presenting the defense of make such waiver. Defendant pleaded that dondelivery to the assured?

there was a waiver and proved it, and there It is argued by plaintiff in error that, as was no testimony tending to show that a every policy holder is charged with knowl- waiver under the strict terms of the certificate edge of the contents of the contract and the was not made. Although required to be in constitution and laws of the society, which writing, a parol waiver of a condition in a are a part of it, the assured knew that the policy is good. Bacon, Ben. Soc. & Life Ins.

88 272 and 422, and authorities cited; Joyce,, law, and should never be permitted except Law of Ins. 8 97b; Mut. Reserve Fund v. under full allegation and proof. Sov. Camp, Farmer, 65 Ark. 581, 47 S. W. 850; N. Y. Life W. 0. W., v. Dees, 45 Tex. Civ. App. 318, 100 Ins. Co. v. Babcock, 104 Ga. 67, 30 S. E. 273, S. W. 366. 42 L. R. A. 88, 69 Am. St. Rep. 134; N. Y. The judgment is affirmed. Life Ins. Co. v. Pike, 51 Colo. 238, 117 Pac. 899.

SMITH, J., entered his disqualification and At the time that the certificate was deliver- did not sit in this case. ed to defendant in error, as the agent of his wife, she was in good health, and the policy could have been delivered to her in person if it had been required. The agent was satisfied to deliver the policy to the husband and to

SMITH et al. v. WORD et al. (No. 6456.) receive the premiums from him, and the so (Court of Civil Appeals of Texas. Austin. ciety cannot be permitted to evade responsi

Oct. 11, 1922. On Motion for Rehearing bility to the beneficiary on a mere technicali Dec. 6, 1922. Rehearing Denied Jan. 31, ty which it had waived.

1923.) [4-6] The evidence fails to show any falsi. ty or intent to deceive upon the part of as ". Evidence am 235–Payee's statements at time

of execution of note admissible to show fraud sured in her representations as to the history

in inception. of her family. We have seen no case in

Where a note was given in part payment of which it has been held that an incorrect his.

a garage business, in transferee's action theretory of the applicant's family would vitiate a

on evidence of statements of the payee at the life policy except as herein indicated. It is time of the garage sale in reference to indebtedcertain that none of the cases cited by plain- ness against his business was admissible to tiff in error hold that misrepresentations or show fraud in the note's inception. mistakes as to family history would vitiate 2. Bills and notes m497(5), 537(6)–Placing a policy. They are all cases in which mis

burden of proof on transferee of note to representations were made as to his personal

show good faith and purchase for value held history by the applicant, except the case of

proper. Ins. Co. v. Pinson, 94 Tex. 553, 63 S. W. 531, In action on a note by the transferee, where in which it was held that the ages of sisters defendant pleaded fraud in inception of the stated in the application were warranties be- note, and proved facts which showed that it cause made so by the policy. No such pro- was fraudulently acquired by payee, and there vision is made in this policy, but the idea of was evidence of a circumstantial nature tending such being the intention of the parties is ex- to impeach transferee's good faith not only as cluded by the fact that it is specially stated of vice in it, the burden of proving good faith

to payment of value, but also to show notice that the certificate shall be void on certain and valuable consideration was on plaintiff, and grounds, and incorrectness of family history the issue was properly submitted to the jury. is not one of them. The only evidence as to

3. Bills nd notes 538(4)—Burden of showmore than one brother of assured having died

ing lack of knowledge of fraud in inception of was that of defendant in error, and he spoke

note improperly placed on transferee. only from hearsay. He had never seen the

In transferee's action on a note, where the brothers or sisters and knew nothing but burden was on plaintiff to show that the note what he had possibly heard. It was too un- was purchased in good faith and for a valuacertain testimony to form the basis for the ble consideration, it was error to instruct that forfeiture of a policy.

it was incumbent on her to show that she had [7] Plaintiff in error did not allege in its no notice of defects in it, as the burden de

volved on defendants to show such notice unanswer that the representations made in the less plaintiff failed to discharge the burden of application as to the family history were proving value and good faith. false nor that any representations made 4. Bills and notes Cw339—Rule as to notice therein were false, and there is nothing in the

to transferee in due course of defenses to pleading, if there had been in the evidence to

note stated. form any basis for forfeiture on the ground

Where purchaser of negotiable paper has of misrepresentations in the application. We paid value and has acquired it in good faith bedo not suppose that the ordinary rules of fore due, it is not enough to defeat his title to pleading have been abolished as to faternal show that an inquiry might have led to knowlbenefit societies, however great favorites they edge of facts which were not actually known. may be under the law of 1913 exempting them from burdens borne by the ordinary insur

On Motion for Rehearing. ance company. They should be held to the 5. Appeal and error em 231(3)-No reversal strictest allegation and proof before they are where objection is made to admission of all permitted to avoid payment of their debts up evidence, part of which was admissible. on the sheerest technicalities. Forfeitures In transferee's action on a note, where are not and should not be favored by the fraud in its inception was pleaded, and evi.

(248 S.W.) dence of statements made by the payee at they by assuming and paying the indebtedness to time of its execution and other statements the Mertzon bank, and by executing the note shortly prior to its transfer to plaintiff were admitted, assignment of error cannot be predi- Word signed as a surety. It was further

in controversy, which the defendant T. D. cated on the admission of evidence where bills of exception showed that objections were made alleged that it shortly developed that the to the entire testimony shown therein, a part of representations were false and fraudulent, which was admissible.

and that Alf Smith owed an indebtedness to

two business concerns, aggregating more 6. Bills and notes 525-Evidence held suffi. cient to impeach good faith of purchaser of than the amount of the note in question, noto before maturity.

which were reduced to judgments, and which Where the payee of a note given in part defendants were compelled to pay by reapayment for a garage transferred it to his son of the liability created by the Bulk sister-in-law shortly before a levy of an execu- Sales Law of Texas, and that thereby the tion against him, in transferee's action against consideration for the note had wholly failed. the makers, evidence held sufficient to support | It was further answered under oath that a verdict impeaching her good faith and claim Mrs. Smith, the plaintiff, had not paid a that she paid value for it.

valuable consideration for the note, and that

she did not purchase it in good faith, but Appeal from District Court, Irion Coun- that the alleged transfer and indorsement ty; C. E. Dubois, Judge.

was made for the purpose of defeating the Action by Mrs. M. A. Smith and another defenses urged by defendants, and was taken against Dee Word and others, in which de- by the plaintiff with knowledge of the de fendants filed a cross-action against Alf fects. Defendants also sought by cross-acSmith. Judgment for defendants on plain- tion a recovery against Alf Smith for any tiffs' action, and plaintiffs appeal. Affirmed. judgment which the plaintiffs might recover Wright & Harris, of San Angelo, for ap

against them. pellants.

The case was submitted to the jury upon Hill & Hill, of San Angelo, for appellees.

special issues as follows:

"1. Did the plaintiff, Mrs. M. A. Smith, purBRADY, J. Appellant, Mrs. M. A. Smith, chase the note sued upon, in good faith, and for joined by her husband, filed this suit against a valuable consideration? If you answer 'No'

to the foregoing question, you need not answer appellees, Dee Word, s. W. O'Connor, and the following question, but will return your T. D. Word, upon a promissory note for answer into court as your verdict; otherwise $1,000, dated March 4, 1918. payable to the you will answer the following question: order of Alf Smith, and due six months after “2. Did plaintiffs at or prior to the time date. She alleged that before the maturity they acquired said note have knowledge or noof the note she purchased the same from all tice of the defendants' defense to said note? Smith for a valuable consideration, and in In connection with the foregoing question, and good faith, and that it was delivered and as a part thereof, you are charged that what

ever is notice enough to excite attention and indorsed to her by Alf Smith. She further put a party on his guard and call for inquiry pleaded that she purchased the note without is notice of everything to which it is afternotice of any of the defenses urged by de.wards found that such inquiry might have led, fendants, and that she was entitled to the although all was unknown for want of investiprotection of an innocent purchaser for value. gation. The defendants pleaded that shortly be

“The burden is upon plaintiffs to prove the fore the execution of the note Alf Smith was

affirmative of the first issue and the negative

of the second issue by a preponderance of the the owner of a garage and automobile ac

evidence." cessories business in the town of Mertzon; that Smith negotiated a sale of the lots, [1] In several assignments of error it is building, stock, and fixtures to the defend | urged that the trial court erred in permitting ants Dee Word and S. W. O'Connor, repre- the defendants Dee Word and T. D. Word senting that all goods had been paid for, and and Frank Emerick, the sheriff, to testify, that he owed no indebtedness except a small over the objection of the plaintiffs, to conamount to the First National Bank of Mert- versations had with Alf Smith, and to statezon; that these defendants agreed to pay ments made by Smith to such witnesses in Smith $2,570 for the property, and to assume relation to the representations made by the debt owing to the Mertzon bank; that Smith at the time of the sale, and also to they relied upon his representations that statements subsequently made by Alf Smith there were no debts and liens against the prop bearing upon his purpose in transferring the erty, and therefore did not require him to note to plaintiff. The testimony in quescomply with the provisions of the Bulk Sales tion was objected to as being immaterial law governing such sales; that, relying up- and irrelevant, and not binding on the plainon Smith's representations, the said defend tiff Mrs. Smith, because it was not shown ants purchased the property, and paid there that she was present at the time of the confor by transferring a flock of goats to Smith, versations, nor that she had knowledge of

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and indexes

same.

the same or of the false and fraudulent rep The evidence in the case was conflicting. resentations admitted by Alf Smith before Mrs. Smith testified positively that she bought or at the time of her purchase of the note. the note in good faith, and paid Alf Smith These and similar objections were renewed | $1,000 for it. She is corroborated by the tesafter all the testimony was in, and plaintiffs timony of her attorney, who drew the check moved the court to strike out the testimony, upon Mrs. Smith's funds, at her direction, and to direct the jury not to consider the in payment of the note. The testimony for

defendants upon this issue is chiefly, if not Much of the testimony objected to was a wholly, circumstantial; their main reliance statement of the representations made by being upon the relationship between the parAlf Smith at the time of the sale in reference ties, Alf Smith being a brother of Mrs. to the indebtedness against the business. Smith's husband, and the rather singular These statements, in our opinion, were clear- want of recollection on the part of Mrs. ly admissible to show fraud in the inception Smith as to the bill of sale made by Alf of the note, which was specifically pleaded by Smith to her conveying his goats for a rethe defendants, and as a predicate for cast- cited consideration of $1,000 cash paid, and ing the burden upon plaintiffs to show that the discharge of a lien which Mrs. Smith Mrs. Smith purchased for value and in good had previously held upon the lots and buildfaith. This holding applies to the testimony ing where Smith had transacted his business. both of Dee Word and T. D. Word in respect These circumstances, it may be assumed, to the representations made by Alf Smith. tended strongly to throw suspicion upon the Prouty v. Musquiz, 94 Tex. 87, 58 S. W. 721, alleged purchase by Mrs. Smith, and upon 996.

her good faith in the transaction. We think a different rule must be applied In these circumstances it may be that the to the testimony of Dee Word relating to the controlling factor in the jury's conclusion to conversation with Alf Smith made just be discredit the testimony of Mrs. Smith was fore the alleged transfer and sale of the note, the testimony of Dee Word and the sheriff in and also as to the testimony of the sheriff relation to the statements made by Alf Smith when he sought to collect a judgment from and his conduct, which we have above point. Alf Smith on an execution. It was admitted, ed out. If the testimony was not admissible, by these witnesses that Mrs. Smith was not it was clearly prejudicial. 'We are of the present at any of the times when the conver- opinion that the testimony was incompetent sations took place, and it was not shown and irrelevant, and was essentially in the that she knew of such conversations before nature of hearsay, Mrs. Smith not having or at the time she acquired the note. In

been present, and it not having been shown these circumstances we are of the opinion that she knew of such statements or conduct that the statements and admissions of Alf Smith were not admissible against nor bind- prior to her alleged purchase. The claim of ing upon Mrs. Smith. The testimony of Dee defendants against Alf Smith was for judgWord as to this phase of the matter was to ment over against him for any amount that the effect that a Mr. Campbell was trying to the plaintiff might recover against them on get a settlement out of Alf Smith for the the note. This claim rested primarily upon Pierce-Fordyce Company, on a debt against the fraudulent representations made by Alf the business, and that Alf told Dee Word at Smith at the sale, which were undisputed, the garage one evening that Mr. Campbell and affords no ground of admissibility for was trying to collect this account, but Alf the statements and actions of Alf Smith imsaid, "I will turn it over to the old lady, mediately preceding the transfer of the note. and see that he don't get that;" the refer. For the erroneous admission of this evidence, ence being to the note in controversy. The we conclude that the judgment must be re testimony of the sheriff was, in substance, versed. that he had a writ of execution against Alf [2] It is also insisted by appellants that it Smith, in March, 1918, and that he was about was error to submit the special issues to the to levy on Alf Smith's goats; that Alf did jury, because the uncontradicted evidence not want him to levy on the goats, and re- shows that Mrs. Smith purchased for value quested him to wait until morning, and that and in good faith, and also that the court erhe would go to the bank and pay it off. The roneously placed the burden of proof upon next morning the sheriff went to the bank to the plaintiff's as to both issues. We do not meet Alf Smith, who did not show up, and agree with appellants that the uncontradictthe county clerk told him that Alf Smith ed evidence showed Mrs. Smith to be a purcame in that morning, and that everything he chaser for value and in good faith. It is had was transferred to Mrs. Smith; that the true that she so testified, and that her tes. transfer referred to was the bill of sale of- timony finds apparent corroboration in that fered in evidence, and was upon some goats. of her attorney, but there is in the record The sheriff further testified that he had a testimony of a circumstantial nature tendconversation with Alf Smith after that, and ing to impeach her good faith, as well as the

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(248 S.W.) ing, although less strongly, to show notice of, the ground that such declarations of Alf the vice in the note.

Smith, à party to the assignment, and made As to the burden of proof, it will be re-while he was still the owner and holder membered that the defendants specially plead of the note, were relevant and proper cirfraud in the inception of the note, and they cumstances to be considered by the jury in denied under oath that Mrs. Smith paid determining whether the transfer afterwards value, or that she purchased in good faith. made was bona fide and for a valuable con. Furthermore, defendants proved facts which, sideration. It is insisted that this is a if true—and they appear to be undisputed-fraud case, and that great latitude is allowed show that the note was fraudulently ac. in that class of cases, both in the pleadings quired by Alf Smith. Having proved fraud and in the proof, since the party alleging in the inception of the note and under the fraud must usually have recourse to circumpleadings, we think the rule announced in stantial evidence. Cases cited in support of Prouty v. Musquiz, 94 Tex. 87, 58 S. W. 721, the contention are Wright v. Linn, 16 Tex. 096, is applicable here, and that the trial 35; Mayo v. Savoni, 1 White & W. Civ. Cas. court properly instructed the jury that the Ct. App. $ 218. burden of proof was upon the plaintiff to The argument as presented is very perprove that she paid a valuable consideration suasive, and has somewhat shaken our conand purchased the note in good faith.

fidence in our previous holding. However, [3] As to the second issue, however, which the authorities cited by appellees were casinvolved the question as to whether Mrs. es involving fraudulent conveyances of goods, Smith, prior to the time she acquired the in which both the intention of the vendor and note, had notice of the defenses urged, we the intention of the vendee were material are of the opinion that the court improperly upon the issue as to whether the conveyances placed the burden upon the plaintiff. An were in fraud of creditors. Here we are answer was required to the second question dealing with the question of the rights of only in the event the plaintiff had discharg- a person claiming to be an innocent holder ed the burden of showing that she had pur- of commercial paper. The rule is well setchased for value and in good faith. It was tled that in such cases, if the purchaser has not incumbent upon plaintiff to show that she acquired the paper before maturity and for bad no notice of the defects in the paper, but value, and under circumstances not tending it devolved upon defendants to show such to show bad faith, the burden is upon the notice, unless she failed to discharge the bur- adverse party to show notice of the defenses, den of proving value and good faith in the as indicated in our former opinion. Failing purchase. See Prouty v. Musquiz, supra. to show notice of the vice in the paper, the

[4] We may add also that the rule of no- rights of the purchaser before maturity in tice given in the charge to the jury is not such circumstances are complete, and the the correct rule as applied to the purchase title good as against defenses not known to of negotiable paper. In such case, if the the purchaser before his purchase. Such purchaser has paid value and has acquired being the law, it is difficult to see how the the paper in good faith, it is not enough to purchaser of commercial paper can be afdefeat his title to show that an inquiry might fected by statements made by the assignor, have led to the knowledge of facts which out of the presence of and without the knowlwere not actually known. The freedom in circulation of negotiable paper requires a edge of the purchaser, even though made more liberal rule for the protection of pur- while he was still the owner of the paper. chasers, and our courts have ever, as far as

But, be that as it may, we think there are We are aware, so held. The last two con

other grounds upon which we should reverse clusions are announced for the guidance of our previous holding, and must now decide the trial court in the event of another trial. that there was no reversible error in admit

All other assignments are overruled. For ting the evidence in question.
the error stated, the judgment will be re-

It is urged by appellees that the assign-
Fersed, and the cause remanded.

ments on this point must be held to be wholly Reversed and remanded.

insufficient, because it appears that appellants have not assigned error to the introduction

of this particular portion of the testimony, On Motion for Rehearing.

but that the assignments relate to other tesOn original hearing this court reversed the timony which was clearly admissible. It is Judgment of the trial court, and remanded further insisted that, even if the assignments the cause, for the reason that we were of be sufficient to raise the question, the bills the opinion that the court committed re. of exception show that the objections below versible error in the admission of certain went to the entire testimony, and not specifievidence, consisting of statements made by cally to the part which we held to be inadAlf Smith to Dee Word and Frank Emerick, missible. The rule is invoked that, when the sheriff

, out of the presence of appellant, Mrs. objection is made to the entire testimony M. A. Smith, and without her knowledge. shown in the bill, and part of it is admissible This holding is challenged by appellees upon and part inadmissible, the case will not be

248 S.W.-47

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