author: MOORE, Justice.

text:
    David John MILLER, Appellant, v. Ellison MILES, Appellee.
    No. 183.
    Court of Civil Appeals of Texas. Tyler.
    Feb. 10, 1966.
    Rehearing Denied March 10, 1966.

      Robert C. McGuire, Turner, Atwood, Meer & Francis, Dallas, for appellant.
    Daniel R. Rogers, Thompson, Knight, Wright & Bullion, Dallas, for appellee.
   MOORE, Justice.

This is a suit for contribution. The facts show that in December, 1958, appellant Miller and appellee Miles, desiring to go into the printing business, formed a corporation known as the Miller Publishing Company, Inc. Miles purchased 52% of the capital stock; Miller 40% and Kenneth Carter purchased the remaining 8%. The company commenced business and shortly thereafter was in need of additional financing. On July 9, 1959, each of the above named stockholders signed a guaranty agreement with the First National Bank of Dallas guaranteeing loans and advances to the company in the amount of $200,000.00. The following day, the company executed a note to the hank in the amount of $125,000.00 which was deposited to the account of the company. On June 2, 1960, the company again being in need of additional financing, which was calculated to be in excess of the original guaranty, Miles and Miller again executed to the bank another guaranty agreement guaranteeing “unlimited” credit to the company. Carter was not a party to this agreement. On the following day, the company executed its note and secured a loan from the bank in the amount of $100,000.00, which was deposited to the credit of the company. In August, 1960, the company again was in financial difficulty. The company was without funds in its checking account. The bank, however, continued to pay overdrafts on the company in the amount of $14,113.50, until August 25th, 1960. On that date both of the above, described notes were past due and the bank, being apprehensive of an examination by bank examiners, called on Miles to make arrangement for payment of the notes and overdrafts. In response to the request, Miles went to the bank and arrangements were made whereby Miles was to execute his personal note to the bank in the amount of $230,654.16 covering both notes, with interest but not including the amount of the overdrafts. The bank was to assign the corporate notes to him and he in turn was to re-assign the notes and guaranties back to the bank as collateral upon his personal note. This was done on August 25, 1960. At this time Miles advised the bank that he no longer desired to be bound on his “unlimited” guaranty and the bank suggested that he sign an additional guaranty in the amount of $17,671.99 to cover the overdrafts, which he did. Thereafter, on September 12, 1960, Miller Publishing Company went into bankruptcy. The First National Bank filed a claim in the bankruptcy basing its claim upon the notes of the company which had been re-assigned to the bank by Miles. As a result of the claim, the bank received the sum of $24,206.42 which was applied as a credit upon the Miles note. In order to raise the money to finally discharge the note, Miles sold some of his oil producing property to Miles Production Company for the sum of $250,000.00 and on April 26, 1961, paid the bank the balance due on his note in the amount of $220,767.-66 including interest.

Appellee Miles filed this suit for contribution against appellant Miller on October 4, 1962, alleging that he had been compelled to pay out the sum of $222,560.41 as a result of the guaranty and that since Miller owned 40% of the stock in the corporation, he should, as a matter of law, be required to contribute 40% of the loss for a total sum of $89,016.16.

Appellant Miller answered with a general denial and specially pled the two-year statute of limitations and the statute of frauds. He further alleged that prior to the execution of the guaranty agreements, Miles agreed that he, Miles, would assume all liability for any loss under the guaranty.

Trial was before a jury and at the conclusion of the evidence, both parties moved for an instructed verdict which was overruled. In response to Special Issues, the jury found: (1) that on October 1st, 1960, Miller Publishing Company owed the First National Bank the sum of $14,113.50; (2) that Miles made payments to the bank on the company indebtedness; (3) that Miles paid to the bank $220,767.66 on the indebtedness ; (4) that he paid such indebtedness on April 26, 1961; (5) that Miles and Miller did not agree that it was Miles’ responsibility to obtain financing for the company and would be solely obligated therefor; (6) that Miller agreed with Miles that he would pay Miles 40% of the amount, if any, which Miles paid the bank in satisfaction of the corporation debts; (7) that after Miles had made payments of the corporation debt to the bank, Miller renewed his promise to pay 40% of said amount; (8) that the demand made by the bank for the payment of the overdrafts upon the company was based solely on the guaranty agreement of August 25, 1960, executed by Miles.

Prior to entry of judgment, the appellant filed a motion for judgment, alternative motion to disregard findings on Special Issues, and alternative motion for judgment non obstante veredicto which were overruled. Plaintiff filed a motion for judgment on alternative grounds which was likewise overruled. After disregarding Special Issue No. 1 and the jury’s answer thereto, the trial court entered judgment in favor of the appellee Miles in the amount of $88,307.06 plus interest thereon at the rate of six (6%) per cent per annum from April 26, 1961, until the date of judgment and interest upon the judgment at the same rate until paid. Appellant duly filed his motion for new trial which was overruled and then perfected this appeal.

As we view the record, this was a simple suit for contribution with most of the material facts being without dispute. While the jury’s findings on Special Issues 1, 6, 7 and 8 form the battleground for more than 200 pages of briefs, we have concluded that the jury’s findings on these issues are immaterial and may be disregarded. After disregarding these issues, we reform and affirm the judgment.

Appellant has assigned 64 Points of Error contending, among other things, that the judgment is erroneous in that it requires a contribution in the amount of 40% of the indebtedness whereas the judgment should have required each of the co-obligors to bear the loss equally. We sustain this contention.

By the terms of the guaranty agreements, each of the guarantors jointly and severally agreed to guarantee the indebtedness of the Miller Publishing Company, the principal obligor. There is nothing in the language of the instruments limiting the liability of the guarantors as between themselves.

The rule governing liability of co-guarantors as between themselves is stated in 27 Tex.Jur.2d, par. 59, p. 326, as follows:

“As a general rule co-guarantors, as between themselves, are required to bear equally the loss occasioned them by default of the principal obligor. Accordingly, one or more of them who has or have satisfied the obligee’s claim against the principal obligor in full may maintain a suit for contribution against the other or others.”

The nature of the right of contribution is stated in 13 Tex.Jur.2d, par. 2, p. 687:

“The doctrine of contribution is founded in equity and natural justice; it has its origin in the equitable consideration that parties who have assumed a common burden should bear it equally. * * * ”

In suits for contribution the right of action is upon the implied promise for reimbursement and not on the debt. Jackson v. Murray, 77 Tex. 644, 14 S.W. 235; 13 Tex.Jur.2d, par. 16, p. 705.

Under numerous Points of Error which appellant refers to as Groups IV and V, he complains of the action of the trial court in submitting Special Issues 6 and 7, as well as refusing to disregard and in rendering judgment based on the issues requiring contribution in the amount of 40% rather than requiring the respective parties to share the loss equally.

The judgment of the trial court does not contain any findings of fact or express the theory upon which it was rendered; however, it is apparent that judgment requires contribution based upon ownership of stock in the company rather than an equal distribution of the loss between the co-guarantors.

Appellee undertakes to sustain the judgment upon the theory that owners of corporate stock who act as guarantors for the company must as between themselves share the indebtedness in proportion to the stock owned by each guarantor and in support of his contention cites the case of Graves v. Smith, 4 Tex.Civ.App. 537, 23 S.W. 603 and Maresh v. Jennings, (Tex.Civ.App.) 38 S.W.2d 406. We are not in accord with this contention and do not believe that the cited cases so hold. As we interpret the holding in those cases, they hold that if a guarantor receives some direct benefit as a result of the guaranty, he would become liable in proportion to the benefit received. There is nothing in the evidence here suggesting that Miller received any direct benefit as a result of the loans. The mere fact that the evidence discloses that Miller owned 40% of the stock, standing alone, would not alter the common law rule of pro rata contribution, and would not therefore form a basis for a judgment requiring a contribution of 40%.

This leads us to a consideration of the question of whether the judgment for 40% contribution can be sustained upon the basis of the jury’s finding in Special Issues Nos. 6 and 7, finding that Miller agreed to contribute 40%. Appellant objected to both of the issues on numerous grounds, one of which there were no pleadings to sustain same. He also requested the court to disregard the findings. The action of the trial court in submitting the issues and in refusing to disregard has been brought forward by assignments of error.

Appellee’s pleadings reveal that the cause of action is for equitable contribution and nothing more. We fail to find anything in the petition that would in any way suggest that the suit was brought to enforce a contract or agreement to pay 40% of the guaranty indebtedness and ap-pellee does not so contend in his brief. The basis of his contention seems to be that as a matter of law equity will require a contribution of 40% of the corporate indebtedness because the appellant owned 40% of the stock.

Since appellee did not allege that appellant contracted to pay 40% of the indebtedness and since appellee does not contend that his cause of action is based upon a contract, we have concluded that Issues 6 and 7 are immaterial and foreign to any issue framed by the pleadings and should therefore be disregarded. On page 69 of his brief, appellee admits that the answers to these issues were immaterial because as he says, his right to a recovery “arose under the law of contribution.” When the issues are found to be immaterial, the jury’s answers to such issues should be disregarded by the trial court in rendering judgment and they should likewise be disregarded by the appellate court where the trial court considers them. American Mut. Liability Ins. Co. v. Parker, 144 Tex. 453, 191 S.W. 2d 844; Owens v. State, (Tex.Civ.App.) 342 S.W.2d 183.

We concur with the ruling of the trial court that the jury’s answer to Special Issue No. 1 was immaterial and therefore should be disregarded.

The issue required the jury to find the amount of money that Miller Publishing Company owed the bank on October 1, 1960. Under the particular facts of this case, we think the question of the amount of money owing by the company involved a legal question, because in order for the jury to answer the question, they would ultimately be compelled to determine whether the Miles note of August 25, 1960, amounted to a discharge of the Miller Company note. Their finding demonstrates that the jury reached the legal conclusion that it did and therefore, according to their finding, the company owed only the sum of $14,113.50 which was the amount of the overdrafts.

The function of the jury is to find facts and in this instance the question of fact presented by the evidence was whether or not the parties intended for the new note to take the place of and extinguish the company notes. Based upon a finding to those issues, it would then become the duty of the court to determíne, as a matter of law, the amount due and owing by the company on October 1, 1960. .Such amount was thus a legal matter for the determination of the court. The jury’s findings thereon amounted to nothing more than a legal conclusion and as such became immaterial and therefore was properly disregarded by the trial court in writing his judgment. Jones v. Winter, (Tex.Civ.App.) 215 S.W.2d 654; Ramm v. Ramm, (Tex.Civ.App.) 294 S.W.2d 174.

We further find Special Issue No. 8 to be immaterial. Appellant takes the position that even though he was a co-obligor on the indebtedness represented by the notes, the effect of this finding relieved him of all liability on the overdrafts. The issue merely inquired as whether the bank’s demand on Miles to pay the overdraft was based solely on the additional guaranty in the amount of $17,671.99, which he executed for the purpose of covering the overdrafts, penalty and interest. Even though it be assumed that the bank based its demand solely upon the additional guaranty agreement, we fail to see how this unilateral act on the part of the bank in making such a demand could relieve Miller of liability upon his “unlimited” guaranty. These funds were advanced while the “unlimited” guaranty was still in full force and effect, and prior to the time Miles executed the third guaranty agreement on August 25, 1960. Since the undisputed facts show that the bank had already disbursed the funds covering the overdrafts under the unlimited guaranty agreement, the rights of the parties thus became fixed prior to August 25th and appellant was therefore bound as a co-obligor on the overdrafts.

Having disregarded Special Issues Nos. 1, 6, 7 and 8, we turn now to the question of whether or not the judgment can be sustained on the basis of the remaining issues. The remaining issues as numbered in the charge established the following facts : (2) that Miles made payments on the indebtedness to the bank; (3) that he paid the sum of $220,767.66; (4) that he paid the same on April 26, 1961, and (5) that there was no agreement that Miles was to obtain the financing and be solely obligated therefor.

We have concluded that these findings, together with the other undisputed facts, establish a cause of action for equitable contribution and that the judgment may be sustained by reforming same so as to require appellant to contribute equally with the other guarantors his pro rata share of the indebtedness.

Appellant contends, however, that the cause of action was barred by the two-year statute of limitations as provided for in Article 5526, Vernon’s Ann.Tex.Civ.St. Appellant reasons that when Miles executed his personal note and delivered it to the bank on August 25, 1960, the note constituted payment of the previous indebtedness and therefore the cause of action for contribution accrued on that date, and since the suit was not filed until October 4, 1962, it was barred by limitations.

The parties agree that the statute of limitations that governs an action for contribution begins to run from the.date of the payment of the obligation. It is also agreed that a cause of action for contribution brought on the theory of implied contract is governed by the two-year statute of limitations. Gaines v. Gaines, (Tex.Civ.App.) 119 S.W.2d 427; 13 T.J.S.2d, par. 18, page 707.

The question of whether or not Miles’ personal note constituted payment of the previous debt therefore becomes important in determining the question of limitations.

Upon the question of whether a promissory note will constitute payment of a preexisting debt, we quote from 44 Tex.Jur.2d, par. 27, pages 677-679:

“The giving of the debtor’s promissory note is not a payment of his obligation, and will not extinguish the debt unless the parties so intend. * * * and the acceptance by a creditor of a new note from one or more of several joint obligors bound on a note or for a pre-existing debt is not a payment thereof, and does not release the other joint obligors.
“The intention of the parties is all-important. ⅜ * * Whether there was a payment depends on the intention of the parties and the facts of the particular case. Intention may be shown by circumstances, and is generally a question of fact for the jury.”

Whether the transaction on August 25, 1960, between Miles and the bank was such as to amount to payment and discharge of the company debts depends on the intention of the parties. If it was the intention of the bank and Miles to discharge the previous obligation represented by the guaranty, appellant’s cause of action accrued on the date he executed his personal note and limitation would commence to run; otherwise, it would not. Boulware v. Robinson, 8 Tex. 327, 328; Barton v. Farmers’ State Bank, (Tex.Civ.App.) 276 S.W. 177. The evidence is not such that we can say that the corporate debts were paid and discharged as a matter of law. The undisputed facts show that in a simultaneous transaction Miles executed his note and the bank assigned him the corporation note and then took a reassignment of the corporation note as collateral which the bank thereafter used as the basis of its claim in the bankruptcy proceedings. This would strongly indicate that the bank never had any intention of releasing the previous indebtedness. At most, the evidence raises only a fact issue as to the intention of the parties. Appellant had the burden of obtaining jury findings establishing facts which would make out his defense of limitations. No objections were made to the charge because of the omission of issues in this connection, nor were any issues requested in this regard. Appellant therefore waived these issues and under the provisions of Rule 279, Texas Rules of Civil Procedure, such issues must be deemed to have been found in support of the judgment. Jones v. Downey, (Tex.Civ.App.) 359 S.W.2d 116.

In addition to this, we think the point is not well taken for another reason. As we construe appellant’s testimony, he testified that he moved from Dallas about September 1, 1961, and resided in Topeka, Kansas, for fourteen months. While ap-pellee failed to plead absence from the state as an exception to the plea of limitations, appellant made no objection to the admissibility of this testimony on that ground. His testimony was therefore properly before the court and amounts to a judicial admission, admitting absence from the state for a sufficient length of time to destroy his plea of limitations. Rule 67, T.R.C.P.; Griffin v. Superior Insurance Company, 161 Tex. 195, 338 S.W.2d 415; McCormick and Ray, Texas Law of Evidence, Vol. 2, Sec. 1127.

Appellant further contends that the suit is barred by Article 3995, Sec. 2, of the statute of frauds, which provides that no action shall be brought to charge any person upon a promise to answer for the debt, default or miscarriage of another, unless the same shall be in writing. The occasion for this contention is brought about by the fact that the court rendered judgment for the appellee based on the jury’s findings in Special Issues Nos. 6 and 7 wherein the jury found that appellant promised to pay 40% of the indebtedness both before and after same was paid. As pointed out before, appellee does not base his suit upon a contract, but bases it upon a promise implied by law. The statute of frauds would therefore not be a bar to the equitable remedy of contribution based upon an implied promise. Furthermore, if we are correct in holding that the jury’s answers to Special Issues Nos. 6 and 7 are immaterial, there would be no basis for the application of the statute.

Appellant further asserts that Miles should not be permitted to recover contribution because he contends the evidence shows that Miles not only judicially admitted that he did not pay the indebtedness, but also offered evidence showing that the debt was paid by Miles Production Company. Appellant argues that since the company paid the indebtedness, Miles should not be permitted to recover the amount paid by the company. In our view, the evidence is not subject to such a strained construction. Although there are some hearsay statements in the bank’s records which might indicate that Miles Production Company paid the indebtedness, both Miles and the vice-president of the bank outlined the procedure by which Miles sold his oil property to the company; the bank loaned the company the funds to buy the property and upon payment, Miles took these funds and paid the bank. There is no evidence of probative force to the contrary, hence the point is overruled.

In the 25th through 30th Points, appellant contends that the court erred in disregarding Special Issue No. 1 and that Special Issues Nos. 2, 3, 4 and 8 are in conflict with Special Issue No. 1. As pointed out before, we think Special Issue No. 1 was immaterial and was properly disregarded by the trial court. The question of a conflict therefore becomes moot.

In Points 31 through 53, the appellant complains of the action of the trial court in overruling the objections to the charge and in failing to submit his requested issues. It would serve no useful purpose to discuss each of these assignments in detail. We have fully considered each of the assignments as well as all remaining assignments and have concluded that neither of them reflect error.

We now turn to the problem of reformation of the judgment. As pointed out before, we have concluded that the judgment is erroneous in that it allows a recovery for 40% of the indebtedness whereas it should have allowed a recovery for contribution on an equal basis in proportion to the amount guaranteed by each guarantor. Since the facts were fully developed, we believe a reformation may be accomplished by simple mathematical calculations based upon the following conclusions.

Miller, Miles and Carter were parties to the first guaranty agreement in the amount of $200,000.00, therefore, they each became obligated for their pro rata share to that extent. Each of them would therefore be obligated to share one-third of the $200,000.00 debt or the sum of $66,666.67 each. Carter settled with Miles prior to suit. Carter was not a party to the unlimited guaranty and therefore Miles and Miller being the only obligors thereon would be jointly liable for the debt in excess of the sum of $200,000.00. The jury found that Miles paid the bank all of the indebtedness in the amount of $220,767.66. The amount in excess of $200,000.00 was therefore $20,767.66. Miles and Miller being co-obligors on the unlimited guaranty agreement thus became obligated for the additional sum of $10,383.00 each. It follows that appellant’s share of the debt was $77,-050.50 and therefore he should be required to make contribution in that amount. 13 Tex.Jur.2d, par. 4, p. 690; Moore v. Hanscom, (Tex.Civ.App.) 103 S.W. 665.

The judgment of the trial court will therefore be reformed so as to allow Ellison Miles to recover of and from John David Miller the sum of $77,050.50 rather than the sum of $88,307.06 as recited in the judgment.

Reformed and affirmed.


source: Caselaw Access Project

author: RENFRO, Justice.

license: Public Domain

text:
    Mrs. M. R. HAYS, Administratrix of the Estate of Mary Etta Hutton, Deceased, Appellant, v. Mary Jo NELSON et al., Appellees.
    No. 16701.
    Court of Civil Appeals of Texas. Fort Worth.
    Feb. 4, 1966.
    Rehearing Denied March 11, 1966.
    Parkhill, Watson & Grantham and Charles W. Grantham, Jr., Grand Prairie, for appellant.
    Hal Jackson and George Hopkins, Den-ton, for appellees.
   RENFRO, Justice.

As stated succinctly by plaintiff, Mrs. M. R. Hays, this was a suit by plaintiff as administratrix of her mother’s estate against her sister, Mary Jo Nelson, and the First State Bank of Denton for bank accounts belonging to the estate and for accounting of monies withdrawn from the accounts by Mary Jo Nelson. Mrs. Nelson contended the bank accounts were given her by survivorship signature cards. The jury found that decedent did not make a gift of the accounts to Mrs. Nelson. Judgment non obstante veredicto was entered for defendants.

Since the Bank, on appeal, is treated by all parties as a mere stakeholder, we will for convenience refer to Mary Jo Nelson as defendant and Mrs. Hays, administra-trix, as plaintiff.

Plaintiff’s appeal is based on her contention that there was sufficient evidence of probative value to support the verdict and the court erred in rendering judgment non obstante veredicto for defendant.

The decedent, Mrs. Hutton, mother of plaintiff and defendant, died January 3, 1963. At the date of her death there was on deposit in her account in the Bank the sum of $5,237.75 in a savings account and $1,402.22 in a checking account.

Wallace Lynch, cashier in the Bank, testified he was Mrs. Hutton’s account officer; that prior to Mrs. Hutton’s death he talked to her by telephone and explained to her the effect of joint survivorship agreement cards; subsequent to that conversation, defendant delivered two authorization cards to him, one pertaining to the savings account and one to the checking account. He recognized defendant’s exhibits 2 and 3 as being the cards in question. On the face of exhibit 2 appeared, below the name of the Bank, the words: “Below please find duly authorized signature which you will recognize in the payment of checks or the transaction of other business on our account. Yours truly.” The signatures of both Mrs. Hutton and defendant appeared immediately thereafter. Exhibit No. 3 bore the signature of Mrs. Hutton on the face of the card.

On the back of Exhibit No. 2 appeared the following: “Joint Account — Payable to Either or Survivor. We agree and declare that all funds now, or hereafter, deposited in this account are, and shall be, our joint property and owned by us as joint tenants with right and survivorship, and not as tenants in common; and upon the death of either of us any balance in said account shall become the absolute property of the survivor. The entire account or any part thereof may be withdrawn by, or upon the order of, either of us or the survivor. It is especially agreed that withdrawals of funds by the survivor shall be binding upon us and upon our heirs, next of kin, legatees, assigns and personal representatives. (Signed) Mrs. M. E. Hutton (signed) Mary Jo Nelson”; and on the back of Exhibit No. 3: “Joint Account — Payable to Either or Survivor. We agree and declare that all funds now or hereafter, deposited in this account are, and shall be our joint property and owned by us as joint tenants with right of sur-vivorship, and not as tenants in common; and upon the death of either of us any balance in said account shall become the absolute property of the survivor. The entire account or any part thereof may be withdrawn by, or upon the order of either of us or the survivor. It is especially agreed that withdrawals of funds by the survivor shall be binding upon us and upon our heirs, next of kin, legatees, assigns and personal representatives. (Signed) Mrs. M. E. Hutton (signed) Mary Jo Nelson.” Lynch testified he was certain the names appearing on the cards were the genuine signatures of Mrs. Hutton and defendant. Although he might have been uncertain about some dates, he was sure, he testified, the signed cards were delivered to him in the Bank prior to Mrs. Hutton’s death, and that he had explained to her before receiving the cards the effect of joint ownership accounts.

Defendant, without objection, testified about the transactions with her mother; she was the youngest of five children and lived with her mother after the other children left home; in later years her mother made a $2,000 payment on defendant’s home and until her death kept a room in defendant’s home; immediately prior to Mrs. Hutton’s death, Mrs. Hutton had physically resided in defendant’s home for two years without charge; she did the housework; Mrs. Hutton never lived with any of the other children; Mrs. Hutton had told defendant in conversations that in the event of her death any money remaining in the Bank would belong to defendant; when defendant brought the survivor cards to her mother for signing her mother understood what the cards meant and said, “If there was anything left, it would be mine”; the statement was made in reference to both cards.

In answer to questions propounded by plaintiff’s attorney, defendant testified: Mrs. Hutton suffered a light stroke in October of 1962 and in November was hospitalized with a broken hip; while Mrs. Hutton was in the hospital, Lynch told defendant that if Mrs. Hutton was going to be ill very long that defendant could sign a signature card and take care of Mrs. Hutton’s affairs; he gave her two cards which she and her mother signed and which she returned to the Bank; she was questioned at length about statements she had made to the effect that the survivor cards had been delivered to the Bank after her mother’s death. She maintained, however, that the cards which have heretofore been quoted were delivered to the Bank prior to her mother’s death; that a second set of cards had been delivered after her mother’s death under the mistaken belief that the first two (Exhibits Nos. 2 and 3) had been signed in the wrong place; she did not know what became of the second set of cards.

By deposition defendant had testified her mother had told her not to turn in the survivorship cards until after her death, but she testified at the trial that her mother was referring to the second set of cards, that she had already turned in the ones in evidence.

Defendant was asked, “Without relating what the cards read, the purpose of the cards in the first place was so that you could take care of your mother’s affairs; is this correct ? A. After her death. Q. In other words, she would take care of them prior to her death, and you would take care of them after her death? A. Yes.”

Although defendant testified extensively, we have above endeavored to summarize the material testimony.

Without belaboring the evidence further, we will say there is some evidence of probative value, and more than a mere scintilla of evidence, that the cards were signed by Mrs. Hutton for convenience of defendant and the Bank and that she did not intend to make a gift of the accounts to defendant.

Judgment non obstante veredicto is never warranted unless a directed verdict would have been proper. Before such a judgment may be sustained, it must appear that there is no evidence of probative force upon which the jury could have made its findings. Wilderspin v. Bewley Mills, 298 S.W.2d 636 (Forth Worth Civ.App., 1956, ref., n. r. e.).

We hold the court erred in setting aside the jury verdict and entering a judgment for defendant.

Defendant vigorously supports the action of the trial court. By cross-points she insists that the answers of the jury were against the great weight and preponderance of the evidence, and if the judgment of the trial court is reversed, said judgment should be reversed and the cause remanded for a new trial rather than rendered for plaintiff.

In Krueger v. Williams, 163 Tex. 545, 359 S.W.2d 48 (1962), it was held: “The phrase ‘payable to the survivor’ is not tantamount to the provision that ‘the certificate is held by them as joint tenants with the right of survivorship’. However, the language appearing on this receipt card does serve to vest in Mrs. Krueger some present interest in and control over the certificate as well as the contractual right to possession of the proceeds as survivor. We therefore say that it does create a presumption of such intention on the part of the purchaser of the certificate and places the burden of proof on one claiming to the contrary.” (Emphasis added.)

The survivorship cards in the instant case contain the provision “owned by us as joint tenants with right and survivor-ship.”

In Staver’s Estate, 218 Wis. 114, 260 N.W. 655 (1935), the right of the survivor to the proceeds of a certificate of deposit made payable to Joseph Staver or Frank J. Staver was upheld. The court pointed out that in the absence of clear evidence that the contract was a convenience account or was created under an express agreement that the third party would hold the proceeds for the benefit of the depositor or his heirs, the complete ownership must be held to be in the survivor.

The agreement setting up a joint bank account which read, “to us, or either of us, or to the survivor of us”, was held in Holbrook v. Hendricks’ Estate, 175 Or. 159, 152 P.2d 573 (1944), to be some evidence of an intention on the part of the survivor to make a gift of a joint interest in the account that would suffice to make out a prima facie case in favor of the survivor asserting such an interest.

In determining whether a verdict is against the great weight and preponderance of the evidence, the court of civil appeals is required to consider and weigh all the evidence in the case and to set aside the verdict and remand the cause for a new trial if it thus concludes that the verdict is so against the great weight and preponderance of the evidence as to be manifestly unjust, this, regardless of whether the record contains some evidence of probative force in support of the verdict. The evidence supporting the verdict is to be weighed along with the other evidence in the case, including that which is contrary to the verdict. In re King’s Estate, 150 Tex. 662, 244 S.W.2d 660 (1951).

In considering the evidence as required by the Supreme Court in King’s Estate, we of course bear in mind the proof plaintiff was required to produce as set out in the cases heretofore cited.

Taking into consideration Lynch’s positive and uncontradicted testimony (except perhaps some confusion as to dates), defendant’s testimony as a whole concerning the relationship between herself and her mother, and all the circumstances existing at and prior to the execution of the survivorship cards, and all other evidence in the record, we are convinced that the jury verdict was so against the great weight and preponderance of the evidence as to be manifestly unjust.

Judgment reversed and cause remanded for a new trial.

Reversed and remanded.


author: FANNING, Justice.

text:
    Jack M. BASS, Jr., et al., Appellants, v. H. Clay FOUTS and Clyde Nichols, d/b/a International Pipe & Supply Company, Appellee.
    No. 7680.
    Court of Civil Appeals of Texas. Texarkana.
    Jan. 18, 1966.
    Rehearing Denied Feb. 15, 1966.

      William Key Wilde, Bracewell, Reynolds & Patterson, David J. Nagle, Houston, for appellants.
    Gerald H. Fortney, Houston, Ervin Flowers, Flowers & McManus, Channelview, for appellee.
   FANNING, Justice.

This suit, brought by plaintiff-appellee, originated as an action to recover the unpaid balances of two promissory notes, attorney’s fees thereon, interest, etc.

Prior to the trial on the merits, this case was consolidated for trial purposes with two others and, by stipulation, the United States Sulphur Corporation, a co-defendant, was dismissed. Early in the trial on the merits, parol evidence tending to prove that defendants-appellants herein were co-guarantors of the payment of the promissory notes in suit and obligated to pay same, though not signatories, was excluded as vio-lative of Articles 3995, Subdivision 2, (Statute of Frauds), and 5932, section 18, (Negotiable Instruments Act) Vernon’s Annotated Texas Civil Statutes.

To avoid the consequences of the trial court’s ruling, the appellee by trial amendment deleted all references to the two promissory notes from his trial petition. As amended appellee’s petition sought recovery upon an account for pipe, etc., allegedly supplied by appellee to appellants and United States Sulphur Corporation, upon the theory that appellants and United States Sulphur Corporation were joint venturers in the operation of a sulphur mine and that such pipe, etc. were furnished to said joint venture and that all of said joint-venturers were jointly and severally liable for the account. It was well proven in the record that United States Sulphur Corporation was insolvent and this was undoubtedly the reason why said corporation was dismissed as a party to the lawsuit by stipulation.

The trial court submitted special issues to a jury. In response to issue 1 the jury found to the effect that appellants and United States Sulphur Corporation were engaged in a joint venture.in the operation of the sulphur mine at High Island, Texas. In response to issue 3, the jury found to the effect that appellee furnishd the materials and services described in plaintiff’s petition at the special instance and request of “this joint venture.” (referring back to special issue 1). The trial court rendered judgment against appellants in the sum of $26,685.26, with interest, costs, etc. Appellants have appealed.

It is clear that the judgment of the trial court can not be sustained on the original theory-upon which the suit was brought, as appellants were not signatories to the two notes originally sued upon, and they could not be held liable on any alleged oral guarantees of the notes in question. See Article 5932, section 18 (Negotiable Instruments Act) and 3995, subdivision 2 (Statutes of Frauds), Vernon’s Annotated Texas Civil Statutes.

Appellants, among other contentions, by points 10, 11 and 12, contend that there was no evidence of probative force to support the jury’s findings to special issues 1 and 3, that the evidence was insufficient to support said findings and that the jury’s answers to special issues 1 and 3 are so contrary to the great weight and preponderance of the evidence as to be clearly wrong and manifestly unjust.

For a comprehensive discussion of the law applicable to the determination of “no evidence” and “insufficient evidence” points, see Chief Justice Calvert’s article “ ‘No Evidence’ and ‘Insufficient Evidence’ Points of Error”, 38 Tex. Law Rev., No. 4, p. 361.

There was no evidence that there was any written joint venture agreement between appellants and United States Sul-phur Corporation to operate the sulphur mine at High Island, Texas, and no character of a written agreement to such effect was offered in evidence. We have also carefully examined the massive and voluminous record and are unable to find any admissible relevant evidence of probative force to show that any direct oral agreement was had between said parties to operate as joint venturers the sulphur mine at High Island, Texas. It is our further view that the circumstantial evidence is too weak and too remote to constitute evidence of probative force; much of such circumstantial evidence was either inadmissible or was of such remote and highly speculative relevancy as not to constitute evidence of probative force to support the jury’s finding that appellants and the Sulphur Corporation were engaged in a joint venture in the operation of the sulphur mine at High Island, Texas. We think the probative force of appellee’s evidence to support the answers of the jury to special issues 1 and 3, is so slight that it at best raises only “a mere surmise or suspicion of the fact(s) sought to be established”, and is in legal contemplation no evidence at all, and it was the duty of the trial court to direct a verdict for appellants. Joske v. Irvine, 91 Tex. 574, 44 S.W. 1059 (1898). Appellants’ 10th point is sustained.

The evidence is insufficient to sustain the jury’s answers to special issues 1 and 3. Appellants’ 11th point is sustained.

Also after carefully considering and reviewing the entire record in this cause in the light of the rules announced in Re King’s Estate, 150 Tex. 662, 244 S. W.2d 660 (1952), we further hold that the jury’s findings to special issues 1 and 3 are so contrary to the great weight and preponderance of the evidence as to be clearly wrong and manifestly unjust. Unquestionably, the great weight and preponderance of the evidence is to the effect that appellants were merely stockholders who also owned royalty interests in the United States Sulphur Corporation. They vigorously denied ever having agreed in writing or orally to become joint venturers with said corporation to operate the sulphur mine in question. It is true that appellants at various times gave' financial aid to the failing corporation in which they had a financial interest as stockholders and royalty owners. They endorsed various notes at different times for the corporation and had to pay them. It is also apparent that they also refused to sign other notes of the corporation. The two notes originally sued on in this cause were not signed by appellants and they can not be held liable on such notes nor can they be held liable thereon by any alleged oral guarantee, for the reasons hereinbefore stated. The fact that appellants gave financial assistance to the failing corporation on other transactions and signed or endorsed various other notes for the corporation is no evidence of probative force that they intended or agreed to be joint venturers with what was a failing or insolvent corporation. The reasonable conclusion is, of course, that they as stockholders and royalty owners were trying to protect the financial interests they owned as stockholders and royalty owners. It would certainly be an unreasonable conclusion that appellants desired to become joint venturers with an obviously insolvent corporation and it is unreasonable to conclude that they intended to make the general financial obligations of an insolvent corporation, as their own. It is also reasonable to further conclude that wherever appellants signed or endorsed the corporation’s notes that they intended to do what they did, but further it is also reasonable to conclude that when they refused to sign, or did not choose to sign or endorse the corporation’s notes that they did not intend to become liable on the notes they did not sign and that they also did not intend to become liable on the debt of the corporation evidenced by the two notes originally sued upon in this cause. As we view this case, appellee seeks to fasten the obligations of the insolvent Sulphur Corporation on appellant stockholders and royalty owners, who did not sign or endorse the two notes in question and who never agreed in writing, orally or by any reasonable implication to become joint venturers with the insolvent sulphur corporation in the operation of the sulphur mine in question. Appellants’ 12th point is sustained.

The sustaining of appellants’ “no evidence” point (point 10) calls for a reversal and rendition of the judgment of the trial court. If we were mistaken in sustaining point 10, then our sustaining of points 11 and 12 would call for a reversal and remand of the cause, and if we were not correct in reversing and rendering we would reverse and remand. However, we are of the view that the appropriate disposition is reversal and rendition rather than reversal and remand.

The judgment of the trial court is reversed and judgment is rendered that ap-pellee take nothing from appellants.

Reversed and rendered.


author: NORTHCUTT, Justice.

text:
    ALLIED PAINT-PATTERSON SARGENT DIVISION-H. K. PORTER COMPANY, Inc., Appellant, v. Dee E. WALLACE and Kenneth L. Wolfe, each Individually, and d/b/a Wolfe and Wallace Paint Contractors, Appellees.
    No. 7562.
    Court of Civil Appeals of Texas. Amarillo.
    Feb. 14, 1966.

      Robinson & Fotheringham, Amarillo, for appellant.
    Charles L. Ballman, Borger, for ap-pellees.
   NORTHCUTT, Justice.

This is a suit upon a sworn account which was filed by the plaintiff, Allied Paint-Patterson Sargent Division-H. K. Porter Company, Inc., against the defendants, Dee E. Wallace and Kenneth L. Wolfe. Individually and d/b/a Wolfe and Wallace Paint Contractors, to recover the sum of $550.59 together with interest at the rate of six per cent per annum from January 1, 1964, together with attorney’s fees in the sum of $150. The prayer in the plaintiff’s petition prayed for the recovery of $150 and - attorney’s fees and also for general relief. The defendants filed a general denial. Judgment was granted for the plaintiff for the sum of $150 with interest from January 1, 1964, at the rate of six per cent per annum plus $75 for attorney’s fees. From that judgment the plaintiff perfected this appeal. Appellant filed its brief herein but appellees did not file any reply brief.

Plaintiff requested the court to file findings of fact and conclusions of law. The court entered its findings of fact and conclusions of law as follows:

FINDINGS OF FACT AND CONCLUSIONS OF LAW
“In response to the request of plaintiff in the above entitled and numbered cause, I make and file the following as my Findings of Fact and Conclusions of Law therein:
I.
“Based upon the itemized account marked Exhibit A attached to Plaintiffs Original Petition, the Itemized invoices and affidavit thereof and the unanswered request for admissions of both defendants on file herein, all of which were offered in evidence and not contradicted, I find the balance of the account due from defendants to plaintiff to be the sum of $550.59.
CONCLUSIONS OF LAW
“Plaintiff’s prayer to its original petition on file herein specifically prays for the recovery of the sum of $150.00; by reason thereof, the Court concludes as a matter of law that plaintiff is entitled to recover only the sum of $150.00 on its account.”

Appellant presents this appeal upon one point of error as follows:

“First Point: The Court erred as a matter of law in limiting the appellant to recovery as specifically prayed for because, under a generalprayer for relief, a party is entitled to recover such relief as the pleadings and the evidence warrant.”

We think the court erred in not granting judgment for the full $550.59 as was shown due under the sworn account and request for admissions and also as found to be due in the court’s findings of fact. It is stated in Morris v. Biggs & Co., Tex.Civ.App., 165 S.W.2d 915 (writ dismissed) as follows:

“The rule is well settled that a prayer for general relief authorizes the court to grant such relief, as the pleadings and the evidence warrant. Silberberg v. Pearson, 75 Tex. 287, 12 S.W. 850; Trammell v. Watson, 25 Tex.Supp. 210, 211; Crenshaw et al. v. Staples, Tex.Civ.App., 173 S.W. 1184; 33 Texjur. 468, § 47.”

Judgment of the trial court is reversed and judgment here rendered in favor of appellant for the sum of $550.59 with interest from January 1, 1964, at the rate of six per cent per annum and the further sum of $75 attorney’s fees.


author: COLEMAN, Justice.

text:
    ORKIN EXTERMINATING COMPANY, Inc., Appellant, v. MASSACHUSETTS BONDING AND INSURANCE COMPANY et al., Appellees.
    No. 14673.
    Court of Civil Appeals of Texas. Houston.
    Dec. 9, 1965.
    On Motions for Rehearing Feb. 17, 1966.
    Second Motion for Rehearing Denied March 17, 1966.

      Robert H. Singleton, Houston, Butler, Binion, Rice, Cook & Knapp, Houston, of counsel, for appellant.
    The Kempers, Houston, John D. Richardson, Houston, of counsel, for appellee.
    Newton Gresham and Sam W. Cruse, Houston, on motion for rehearing amicus curiae.
   COLEMAN, Justice.

By this suit appellant seeks to recover from appellee the amounts paid by appellant to satisfy a judgment previously secured against it by Gulf Coast Rice Mills. The cause of action is based on a comprehensive liability insurance policy. Both parties filed motions for summary judgment based on the pleadings, admissions, depositions and affidavits before the court. The trial court sustained appellees’ motion and entered judgment that appellant take nothing.

At the time of the occurrence forming the basis of the liability of appellant to Gulf Coast Rice Mills, appellant carried with appellee a comprehensive liability insurance policy, pertinent provisions of which read:

II. Defense, Settlement, Supplementary Payments. As respects the insurance afforded by the other terms of this policy the company shall: ■
(a) defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent; but the company may make such investigation, negotiation and settlement of any claim or suit as it deems expedient;
(c) pay all expenses incurred by the company, all costs taxed against the insured in any such suit and all interest accruing after entry of judgment until the company has paid, tendered or deposited in court such part of such judgment as does not exceed the limit of the company’s liability thereon;
(e) reimburse the insured for all reasonable expenses, other than loss of earnings, incurred at the company’s request.
The amounts incurred under this insuring agreement, except settlements of claims and suits, are payable by the company in addition to the applicable limit of liability of this policy.
⅜ ⅜ ⅜ ⅜ ⅜ ⅜
9. Notice of Accident. When an accident occurs written notice shall be given by or on behalf of the insured to the company or any of its-authorized agents as soon as practicable. Such notice shall contain particulars sufficient to identify the insured and also reasonably obtainable information respecting the time, place and circumstances of the accident, the names and addresses of the insured and of available witnesses.
10. Notice of Claim or Suit. If claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him or his representative.
11. Assistance and Cooperation of the Insured. The insured shall cooperate with the company and, upon the company’s request, shall attend hearings and trials and shall assist in effecting settlements, securing and giving evidence, obtaining the attendance of witnesses and in the conduct of suits. The insured shall not, except at his own cost, voluntarily make any payment, assume any obligation or incur any expense other than for such immediate medical and surgical relief to others as shall be imperative at the time of accident.

This policy of insurance was issued as of January 1, 1955. In August, 1955, appellant’s employees, in an attempt to eradicate the pests which were causing damage to milled rice owned by Gulf Coast Rice Mills and stored in its warehouse, blew dust containing lindane into the warehouse. This dust settled on and around the sacks containing the rice and small amounts of the lindane sifted through the sacks onto the rice. Soon thereafter an agent of the U. S. Food and Drug Administration inspected the premises and barred shipment of the rice in interstate and foreign commerce. Over a period of months discussions were held by agents of the Rice Company with the agents of the local, state and federal officials concerned, culminating in a decision to re-mill the rice. Thereafter, appellant was presented with a statement of the loss sustained by the rice mill, which was reported to the home office of appellant on May 24, 1956. On June 28, 1956, notice of the claim for damages was first given to representatives of the insurance company. Appellee’s insurance adjuster immediately determined from the employees of appellant when and how the claimed damage occurred and the amount of the claim and sent this information to the Insurance Company.

By the terms of the policy of insurance, appellant deposited certain sums of money with the insurance company as a standard premium, subject to a “retrospective Rating Plan D,” which prescribed in detail the method to be followed in computing the final premiums. The company was required to compute the retrospective premium based upon incurred losses valued as of a date six months after the termination of the policy. This constitutes the final premium if all claims have been closed. If claims are pending, then a further review is required annually after the first review. The retrospective premium is defined to be the sum of the basic premium, the excess loss premium, and the modified losses multiplied by the applicable state tax multiplier; each of the terms concerned with premiums is defined. “Incurred Losses” is defined as the sum of (1) all losses, including medical actually paid, (2) reserves for unpaid losses as determined by the company, and (3) allocated loss expenses. There is also a further provision that “incurred lossess” do not include amounts, exclusive of allocated loss expense, in excess of $10,000.00 for any one accident for property damage liability. “Modified Losses” means the “incurred losses” multiplied by a loss conversion factor set out in the policy. After the retrospective premium is determined, the insured is either refunded part of the standard premium he had previously deposited, or required to pay an additional premium depending on his loss experience.

Appellee made its first computation of the restrospective premium during August or September, 1956, and on September 19, 1956, credited appellant with a substantial return of premium. In making this computation a reserve of $1,000.00 was set up for the Rice Mill claim as an incurred loss. As a result the premium return credit was $1,000.00 less than it would have been had no reserve been set up on the Rice Mill claim. In effect the premium paid by appellant at this time was increased by the sum of $1,000.00 because of the reserve set up for this claim.

On September 20, 1956, the Superintendent of Claims for the Insurance Company wrote appellant a letter with reference to this claim requesting a label from a bag of lindane and copies of literature available to appellant concerning the use of lindane. In this letter these statements are found:

“We feel we have a very dangerous situation on our hands in so far as this claim is concerned, and we will appreciate your co-operation and assistance in combatting the allegations of these claimants.
“For your information we are sending you a copy of the signed statement secured from your representative, Joe D. Preston, in order that it may help you to determine what information we will need to-defend this claim.”

Appellant, in reply to this letter, sent the information requested together with a letter dated October 23, 1956, in which appeared this statement: “I wish to apologize for the delay in answering your letter and trust that the information contained herein will be useful to you in defending this particular claim.”

Between August, 1956, and January, 1957, the adjuster made a thorough investigation of the claim and made periodic status reports to the Superintendent of Claims. On January 1, 1956, and again on January 1, 1957, the policy of insurance was renewed.

In January, 1957, the second computation of the retrospective premium was made and the reserve for the Rice Mill claim was increased to $10,000.00. This computation was reflected in the claim analysis received by appellant on July 15, 1957. By this analysis appellee determined that the “Modified Losses” arising from the claim as computed under the premium plan would result in an increase in premiums of about $11,-856.00, the maximum which could be charged under the plan for full protection against the claim. The net premium due was paid on receipt of statement October 31, 1958.

Correspondence between the adjuster and the Superintendent of Claims reflects that the adjuster inquired as to the position which the company intended to take relative to liability on the claim in view of the late notice received and also raised a question as to whether the incident from which the claim arose constituted an “accident” as contemplated by the insurance policy. During the investigation the adjuster interviewed agents of the Rice Mill and had conferences with the attorney representing it from whom he received an opinion that the claim might be settled for 50% of itemized damage.

In March, 1957, the adjuster wrote a letter to the Superintendent of Claims, in which appeared an implied criticism of the cooperation which he had received from appellant. In reply he received a letter in which this statement appeared: “We have no reason to criticize our assured for failure to cooperate with us in the handling of any claim in the past and we do not feel that they should be criticized now in this instance.”

The investigation continued into the summer of 1957. On June 25, 1957, Gulf Coast Rice Mills filed suit against appellant and citation was served on July 6,1957. On July 22, 1957, the adjuster brought a proposed “Non-Waiver” agreement to appellant’s Houston office and stated that unless it was signed the appellee would be unable to file an answer in the .suit on behalf of appellant. The Houston manager secured authority by telephone and signed the agreement as presented. This agreement reads:

“It is hereby agreed by and between the Massachusetts Bonding and Insurance Company and the Orkin Exterminating Company, Inc. that no action heretofore or hereafter taken by the Massachusetts Bonding and Insurance Company shall be construed as a waiver of the right, if any, of the Massachusetts Bonding and Insurance Company to deny liability to the Orkin Exterminating Company, Inc. under a policy of insurance which is claimed by the Orkin Exterminating Company, Inc. to cover claims asserted or which may hereafter be asserted by R. L. Williams and J. M. Chumney, doing business as a partnership under the name of Gulf Coast Rice Mills as either the bases of the suit brought in its name as Plaintiff in Cause No. 488,534 against Orkin Exterminating Company, Inc. as Defendant therein in the District Court of Harris County, Texas, or otherwise.

“It is also agreed that by the execution of this agreement the Orkin Exterminating Company, Inc. does not thereby waive any rights under the said policy.”

Prior to this time appellee had not indicated to appellant that it was considering denying liability by reason of late notice or denying coverage under the terms of the policy. There had been no previous suggestion that a non-waiver agreement would be required.

There is testimony that because Orkin believed that the Insurance Company was investigating the claim and would defend on its behalf, prior to July 22, 1957, Orkin had retained no lawyers to represent it, and had made no independent investigation of the matter; that it relied on the insurance company to defend its interests and was not prepared to defend the suit when the non-waiver agreement was presented. There was also testimony that Orkin made no attempt to settle the claim because the matter was being handled by the insurance company. There is also testimony that the insurance company never gave the adjuster authority to settle the claim and that he entered into no settlement negotiations.

It is undisputed that notice was first given to appellee on June 28, 1956, of the fact that appellant had applied lindane dust to the warehouse belonging to Gulf Coast Rice Mills in August, 1955, and that a claim for damages was being asserted by the Rice Mills by reason of this occurrence. Appellee relies on this delayed notice as a defense to its liability on the policy. Appellee further denies that the occurrence constituted an accident as that term is used in the policy.

It is undisputed that after appellee undertook the investigation of this claim, and after it was fully informed of Orkin’s delayed notice, appellee charged and collected from appellant a premium for the various insurance policies which appellant carried with it, which premium was $1,000.00 more than it would have been had not appellee set up a reserve of $1,000.00 as an incurred loss on this claim. Thereafter this reserve was increased to $10,000.00, which, by reason of the retrospective rating plan, resulted in again increasing the premium charged appellant. The audit showing such increased reserve, together with an invoice reflecting the increased premium, was sent to appellant. These actions were taken before appellant was advised that appellee intended to rely on its policy defenses and before coverage was denied, as well as before the non-waiver agreement was presented to appellant. Part of this premium was paid from deposits held by appellee and the balance was paid in due time after the non-waiver agreements were executed.

Appellant pled, and here asserts, that appellee has waived its policy defenses, and is estopped to assert them, by this course of conduct. With the exception of the question of policy coverage, fact issues are clearly raised as to each of these questions. Glens Falls Ins. Co. v. Bendy, Tex.Com.App., 58 S.W.2d 1; Carolina Ins. Co. v. Christopher, Tex.Com.App., 130 Tex. 245, 106 S.W.2d 138, opin. adopted; American National Ins. Co. v. Wiggins, Tex.Civ.App., 4 S.W.2d 595; Trinity Universal Ins. Co. v. De Martini, Tex.Civ.App., 118 S.W.2d 901, error ref.

In Southland Life Ins. Co. v. Lawson, 137 Tex. 399, 153 S.W.2d 953, 136 A.L.R. 1212, the Court quoted with approval from the opinion of the Supreme Court of the United States in Globe Mutual Ins. Co. of New York v. Wolff, 95 U.S. 326, 24 L.Ed. 387, as follows:

“ ‘The doctrine of waiver, as asserted against insurance companies to avoid the strict enforcement of conditions contained in their policies, is only another name for the doctrine of estoppel. It can only be invoked where the conduct of the companies has been such as to induce action in reliance upon it, and where it would operate as a fraud upon the assured if they were afterwards allowed to disavow their conduct and enforce the conditions.’ ”

We are of the opinion that the testimony heretofore summarized establishes, in the absence of testimony to the contrary, the elements of estoppel.

A party will not be allowed to assume the inconsistent positions of affirming a contract in part by accepting or claiming its benefits, and disaffirming it in part by repudiating or avoiding its burdens. Daniel v. Goesl, 161 Tex. 490, 341 S.W.2d 892.

At the time the non-waiver agreement was executed appellee had debited appellant with an increased premium because of this claim. Under the terms of the policy the insuring agreements, including the obligation to defend groundless suits, are subject to the conditions of the policy concerning notice of accidents and forwarding of claims. We are unable to agree that a claim could constitute an incurred loss under the policy, where notice of the accident was given eight months after it occurred, unless the company waived the policy condition requiring notice as soon as practicable. We construe the language of the non-waiver agreement to the effect that “no action heretofore or hereafter taken” by the company shall be construed as a waiver of its right, if any, to deny liability under the policy, to mean no action taken in the investigation of this particular claim or the defense of the suit brought by reason thereof. The charging and accepting of increased premiums is not such action as would be affected by the non-waiver agreement since such actions are only indirectly related to the investigation of the claim and the defense of the suit, and are not such actions as would reasonably be within the contemplation of the parties.

Non-waiver agreements are strictly construed against the insurer and liberally in favor of the insured. Highway Ins. Underwriters v. Griffith, Tex.Civ.App., 290 S.W.2d 950, ref., n. r. e. The agreement that no action by the insurer would constitute a waiver will not be construed to bar the insured from setting up the actions of the insurer as a basis for invoking the doctrine of estoppel.

It is well settled, however, that coverage under an insurance policy cannot be created or broadened by reason of an estoppel beyond the risk contractually assumed under the terms of the policy. Great American Reserve Ins. Co. v. Mitchell, Tex.Civ.App., 335 S.W.2d 707, error ref.; Washington National Ins. Co. v. Craddock, 130 Tex. 251, 109 S.W.2d 165, 113 A.L.R. 854; White v. Great American Reserve Ins. Co., Tex.Civ.App., 342 S.W.2d 793.

The policy of insurance under consideration agrees to indemnify insured against liability' for property damage caused by accident. Appellee contends that there is no coverage in this instance since the damage foreseeably resulted from the flowing of the lindane dust into the warehouse, and the natural and ordinary consequences of a negligent act do not constitute an accident.

While there is authority to the contrary, the majority rule appears to be that stated in Appleman, Insurance Law and Practice, Vol. 7A, Sec. 4492, p. 7, as follows: “Injuries resulting from ordinary negligence are considered to have been accidental as has been the case even though gross negligence were shown, where there was no actual intent to injure.”

The Texas cases support this statement of the law. American Indemnity Co. v. Jamison, Tex.Civ.App., 62 S.W.2d 197; Travelers Ins. Co. v. Reed Co., Tex.Civ.App., 135 S.W.2d 611, dism., judg. corr.

There is no evidence that the lin-dane was applied for the purpose of injuring the rice located in the warehouse, or with the intent to cause damage to Gulf Coast Rice Mills. Since the claim of Gulf Coast Rice Mills was predicated on acts committed negligently, even in violation of law, hut not with the intent to inflict injury, such claim was within the coverage of the insurance policy. Bundy Tubing Company v. Royal Indemnity Company (6th Cir., Mich.), 298 F.2d 151; Maryland Casualty Co. v. Mitchell, 322 F.2d 37 (5th Cir., Tex.); Cross v. Zurich General Accident & Liability Co. (7th Cir. Ill.), 184 F.2d 609.

Appellant has contended that the non-waiver agreement is ineffective because it is supported by no consideration. Since appellees were estopped to assert the policy defenses at the time the non-waiver agreement was signed, and the loss was within the coverage of the policy, appellee was obligated to defend the suit and the non-waiver agreement was without consideration. Home Ins. Co. of New York v. Lake Dallas Gin Co., Com.App., Texas, 127 Tex. 479, 93 S.W.2d 388, opinion adopted; 269 Canal Street Corporation v. Zurich General Accident & Liability Ins. Co., 226 App.Div. 516, 235 N.Y.S. 63; Home Indemnity Co. v. Williamson (5th Cir., Miss.), 183 F.2d 572.

We are of the opinion that appellant’s contention that their right to plead and prove waiver of policy conditions by reason of actions of the insurer was preserved to them by the clause in the non-waiver agreement reading: “It is also agreed that by the execution of this Agreement the undersigned does not thereby waive any rights under the said policy.”

This contention was made in New Amsterdam Casualty Co. v. Hamblen, 144 Tex. 306, 190 S.W.2d 56, and the Supreme Court of Texas held that if the insured failed to give notice of an accident or suits as soon as reasonably possible, the failure invalidates the claim for indemnity. The court further held that where the claim was already invalid on the date notice of the claim was given to the insurer, the insured had no right at that time to require payment by the insurer so that the quoted language from the agreement could not preserve such a right to the insured. The court held that “rights under the said policy” did not include the right to limit the effect of the non-waiver agreement.

Since the language of the non-waiver agreement, as well as that of the policy conditions, in that case are substantially the same as in this case, it is decisive of the contention in this case.

Appellant has also urged that the insurer impliedly offered to extend coverage to this claim, even if it should be held not within the coverage of the policy as written, by charging and collecting the additional premium and by representing that the claim would be defended by the company, and that by paying the premium the offer was accepted by appellant by reason of which a new contract to insure was created. There was no express agreement to this effect, either oral or in writing. The rationale for implying such a contract would necessarily be a species of estoppel in the absence of such an agreement.

There is authority that an insurance contract may be modified by subsequent parol agreement. Canfield v. Newman, Tex.Civ.App., 265 S.W. 1052; Stadtler v. Southern Surety Co., Tex.Civ.App., 253 S.W. 681; United Bankers Life Ins. Co. v. Matthews, Tex.Civ.App., 275 S.W.2d 179, ref.; n. r. e. In each of these cases, however, there was testimony from which agreements could be found under well recognized rules of contract law.

This case is determined by the cases heretofore cited holding that coverage of an insurance policy cannot he extended beyond the language of the policy by estoppel.

While appellant also filed a motion for summary judgment, the action of the trial court in denying its' motion was not brought before this Court. Gulf, Colorado & Santa Fe Railway Co. v. McBride, 159 Tex. 442, 322 S.W.2d 492.

The judgment of the trial court is reversed and the cause remanded.

On Motions for Rehearing

On this motion for rehearing we have-been favored with a brief by Amicus Curiae raising a question which has given us serious concern. The Amicus Curiae states this proposition:

“A casualty insurance company is required under the laws of this State to establish a reserve for a potential loss even though liability for it may be denied and since premium rates are fixed by the State the charging and accepting of a premium payment cannot be grounds to avoid the terms of an executed non-waiver agreement so as to hold the insurance company estopped to deny coverage under the policy.”

Article 21.39 of the Insurance Code, V.A.T.S. provides:

“Every insurer shall maintain reserves in an amount estimated in the aggregate to provide for the payment of all losses or claims incurred on or prior to the date of statement, whether reported or unreported, which are unpaid as of such date and for which such insurer may be liable, and also reserves in an amount estimated to provide for the expenses of adjustment or settlement of such claims. The Board of Insurance Commissioners shall adopt each current formula for establishing reserves applicable to each line of insurance recommended by the National Association of Insurance Commissioners and all companies writing the line of insurance to which each such adopted formula is applicable shall establish reserves in compliance therewith. Acts 1951, 52nd Leg. ch. 491; Acts 1955, 54th Leg., p. 413, ch. 117, § 52.” (Emphasis supplied)

If, therefore, in this case the insurer was required by law to set up a reserve on the claim made by the Rice Mill against their assured, and if the amount of such reserve is determined by a formula prescribed by the Board of Insurance Commissioners, it could not in reason be held that the establishment of such a reserve could be the basis of an estoppel unless the prescribed formula permitted the insurer to differentiate between claims which in reasonable probability will result in losses, and claims which probably will not result in a loss.

The record does not disclose whether the regulations of the Insurance Board require that a full reserve be established on an unfounded claim or whether it is the usual practice of well managed insurance companies to set up on their books reserves adequate to pay a claim when it is their considered opinion after investigation that no liability exists.

The policy provides that the company shall make a computation of the retrospective premium based upon incurred losses valued as of a date six months after the termination of the policy. It further provides that the premium so computed shall be the final premium if all claims have been closed or if it is apparent that the retrospective premium will exceed the maximum. If all claims have not been closed and the retrospective premium does not exceed the maximum, a further computation based upon incurred losses valued as of a date eighteen months after the termination of the policy is required. Provision is made for further computation if necessary. “Incurred losses” is defined in the policy to include losses actually paid, reserves for unpaid losses as determined by the company, and allocated loss expenses. The policy does not provide that the premium be based on claims for which liability is not conceded. The word “loss” is not defined in the policy. In Black’s Law Dictionary, 4th Ed., the word “loss”, as applied to insurance, is defined:

“Ascertained liability of insurer, Michel v. American Fire and Casualty Co., C.C.A. Fla., 82 F.2d 583, 586; * * * injury or damage sustained by insured in consequence of happening of one or more of the accidents or misfortunes against which insurer has undertaken to indemnify the insured, 1 Bouv.Inst. No. 1215; pecuniary injury resulting from the occurrence of the contingency insured against, Ocean Accident & Guaranty Corporation v. Southwestern Bell Telephone Co., C.C.A.Mo., 100 F.2d 441, 446; * * * Loss from liability is loss which arises when liability becomes fixed, Cormier v. Hudson, 284 Mass. 231, 187 N.E. 625, 627; Boney v. Central Mut. Ins. Co. of Chicago, 213 N.C. 470, 196 S.E. 837, 842 [117 A.L.R. 231].”

In Manhattan Life Ins. Co. v. Stubbs, Com.App., 1921, 234 S.W. 1099, the company was sued for penalties and attorney’s fees by reason of the delay of the company in paying a “loss” after demand by insured. The court said:

“Plaintiff in error also contends that the maturing of a 15-year endowment life insurance policy, at the end of said period, is not a ‘loss,’ in the meaning of said article 4746 of the statutes. We cannot concur in this view. The maturing of the policy, whether by death of the insured or the arrival of the end of the cumulation period during the lifetime of the insured, would have the same effect. The liability attaches in either event, and a loss has occurred.” (Emphasis added)

In Miles v. United Services Automobile Ass’n, Tex.Civ.App. 1941, 149 S.W.2d 233, aff’d United Service Automobile Ass’n v. Miles, Com.App.1942, 139 Tex. 138, 161 S.W.2d 1048, the court quoted the following definition of “loss”, found in Webster’s New International Dictionary, with approval: “Destruction of or damage to the subject insured; or the death or injury of an insured person by the perils insured against in such a manner as to charge the insurer with a liability under the terms of the policy.” (Emphasis added)

The phrase “reserves for unpaid losses as determined by the Company” must be held to mean reserves in an amount determined by the company to be adequate to cover all claims for which the company concedes liability. If the company is required by law to maintain reserves on claims for which the company denies liability, nevertheless the policy does not require or authorize that such reserves be considered in computing premiums. If liability is subsequently established, the policy provides for a recomputation of the premium. The policyholder is not required to pay for protection which he does not obtain.

It follows, therefore, that the inclusion of the reserve set up for the Rice Mill claim by appellee as an “incurred loss” in computing the retrospective premium charged appellant constitutes an admission that appellee was liable under the policy to indemnify appellant for the loss, if any, which appellant might sustain by reason of the Rice Mill claim.

The policy for which the premium charge was made insured appellant against many different risks and covered its operations in a number of states. However, prior to the time appellee secured the non-waiver agreement it had charged and collected a premium $1,000.00 in excess of that it would have been entitled to collect had not this claim been considered an “incurred loss”. At the end of eighteen months after the termination of the first policy year it had recomputed the premium as required by the policy because all claims had not been settled, and the retrospective premium did not exceed the maximum. This computation was furnished to appellant before the non-waiver agreement was presented and reflected an additional premium charge by reason of the fact that the reserve for the Rice Mill claim was increased and included in “incurred losses”.

We find no basis for the inclusion of the estimated expense of an investigation to determine the liability of the company under the policy to furnish a defense to a suit against its insured as an “incurred loss.” Nor do we think the company can include as an, “incurred loss” the estimated cost of making such a defense without admitting liability unless it first secured a non-waiver agreement.

We remain of the opinion that at the time the non-waiver agreement was executed appellee was estopped as a matter of law to deny that it had waived the provisions of the policy requiring prompt notice of accidents and the immediate forwarding to it of claims.

Amicus curiae are concerned in that under their construction of the original opinion of this Court insurance companies could not charge a premium based upon a reserve for contingent liability and expense in any situation where a claim is being handled under a non-waiver agreement. Certain language in our opinion might be so construed. We restrict our holding in that respect to the facts in this record. It is our holding that in light of this record the policy in question did not authorize a premium charge based on a reserve for a contingent claim where liability under the policy was not conceded. We further point out that the acts on which waiver and es-toppel as a matter of law were predicated occurred prior to the execution of the non-waiver agreement. If an insurance company is authorized by the terms of a policy to charge a premium based on a reserve for contingent liability, it is probable that the charging of such premium would not amount to a waiver or constitute an element of estoppel even in the absence of a non-waiver agreement.

We remain of the opinion that appellant’s rights under the policy, as they existed at time of the execution of the non-waiver agreement, were preserved by the terms of that instrument. On reexamination of the record we find that appellant properly presented in this Court its point that the trial court erred in denying its motion for summary judgment. Since we have held that appellee is estopped to insist on its policy defenses and have held that the loss sustained by appellant is within the coverage of the policy, the amount of the loss not being in dispute, we are of the opinion that appellant’s motion for summary judgment should have been sustained by the trial court.

Appellees’ motion for rehearing is denied. Appellant’s motion for rehearing is granted. The judgment of the trial court is reversed and judgment is here rendered that appellant, Orkin Exterminating Company, Inc., have judgment against appellee, Hanover Insurance Company, in the sum of Fifty Four Thousand Six Hundred Twenty One and No/100 ($54,621.00) Dollars, together with interest at the rate of 6% per annum (1) on the sum of Twenty Six Thousand Seven Hundred Twenty and 2½oo ($26,720.21) Dollars from the 8th day of July, 1963; (2) on the sum of Twenty Six Thousand One Hundred Ninety Two and 6%oo ($26,192.50) Dollars from the 3rd day of September, 1963; (3) on the sum of Nine Hundred Eighty Three and 98Aoo ($983.98) Dollars from the 30th day of October, 1963; (4) on the sum of Seven Hundred Twenty Four and 3¼⅛0 ($724.31) Dollars from the 20th day of November, 1963, until the date of entry of this judgment, together with interest on the total judgment from date of entry until paid, and all costs in the trial court and this Court.


author: WILSON, Justice.

text:
    REPUBLIC NATIONAL LIFE INSURANCE COMPANY, Appellant, v. Willie BLANN et ux., Appellees.
    No. 4471.
    Court of Civil Appeals of Texas. Waco.
    Feb. 24, 1966.
    J. W. Dewbre, Dallas, for appellant.
    T. B. Bartlett and Jack Welch, Marlin, for appellees.
   WILSON, Justice.

This appeal requires construction of a contract of group hospital insurance upon which appellee recovered judgment after a non-jury trial. We affirm the judgment.

The contract consists of four documents: (1) a master policy of group hospital expense insurance issued by appellant to the City of Marlin, appellee’s employer; (2) a rider attached to the master policy providing benefits to dependents of employees, (3) a certificate of insurance issued to appellee under the group insurance contract, and (4) a rider attached to the certificate.

The employee recovered judgment for benefits arising from hospital confinement of his wife at the birth of their child. The insurer’s position is that maternity benefits for dependents are not provided by the contract. It argues that the terms of the master policy excluding such coverage control over those of the certificate which provide it.

The base master group policy issued to the employer contained an express agreement to pay for hospital confinement of employees necessitated by childbirth. It did not afford coverage to dependents of employees. A rider was issued which extended benefits to dependents, including the wife of an insured employee. This amendment to the base master group policy, however, excluded dependents’ coverage with respect to any hospital confinement resulting from childbirth. The base certificate of insurance issued to the employee, appellee, recited that he was insured under the master policy, the provisions of which and the attached rider were applicable to the certificate. By this base certificate the insurer agreed to pay specified hospital benefits to female employees on account of childbirth.

The rider issued by appellant and attached to the employee’s certificate, notwithstanding, certified that the employee was insured for benefits listed in that rider with respect to his wife, subject to the conditions of the master policy issued to the employer. It recited:

“All provisions of said policy of group hospital expense insurance and the certificate to which this rider is attached, not inconsistent herewith, whether summarized on the following pages or not, apply to the insurance evidenced by this rider.”

It then provided hospital expense benefits for an employee’s wife while necessarily confined in a hospital as a resident patient due to pregnancy or childbirth.

Appellant asserts, “the provisions of the master policy do not provide dependent maternity benefits; the certificate of coverage issued to appellee does.” It relies on Wann v. Metropolitan Life Ins. Co., Tex.Com.App., 41 S.W.2d 50 in support of the postulate that the master policy provisions control those of the certificate and rider. The Wann case merely held that where the certificate was subject to the terms of the master policy, it was necessary to prove the latter. See Equitable Life Assurance Society of U. S. v. Nelson, Tex.Civ.App., 396 S.W.2d 517, no writ; Connecticut General Insurance Company v. Reese, Tex.Civ.App., 348 S.W.2d 549, writ ref., n. r. e.

Here the certificate, as modified by its rider, expressly restricted the application of the master policy provisions to those provisions “not inconsistent herewith.” Those provisions of the master policy or its addendum which are inconsistent with the certificate and its amending rider are required to yield to the latter by the very language of the contract. See 17 Am.Jur. 2d, Contracts, Sec. 264, p. 670; 13 Tex. Jur.2d, Contracts, Sec. 116. There is no resulting conflict of provisions; the parties themselves resolved the conflict.

The insurer then says it is not liable because plaintiff wrote a letter inquiring of it whether the policy covered the loss involved : “I would like to know if this policy covers pregnancy of the employee’s wife. The way I read it, it does. So if you would explain It to me I would be grateful.” The insurer replied that the policy only provided benefits for female employees; not for dependents. The insurer insists that plaintiff, “having gone too far in intentionally and voluntarily asking the fatal question” is bound by the insurer’s answer.

The contention is rejected. It would be a novel rule and a strange result if a prospective claimant, by asking an insurer’s opinion of its liability, should be interdicted by its self-serving erroneous answer. For want of authority on so singular a point, we adopt Appellee’s suggestion that by this logic the alarmed farmer who points his gun at the henhouse door in the darkness and calls, “who’s there?” will be bound by the answer, “Nobody here but us chickens! ” Appellant’s points are overruled. Affirmed.