Allstate Insurance Company, Appellant, v. Carl Mckenzie et al., Appellees, 246 F.2d 151 (5th Cir. 1957)

Alleging in detail:¹  the issuance to and J. A. Gabehart of an automobile policy on a 1947 Ford automobile; the transfer of the car without plaintiff's knowledge or consent to George Gabehart; its collision many months afterward with another car; and that a demand had been made upon it to defend suits brought as a result thereof; plaintiff sought a declaratory judgment: that the sale of the automobile had effected a cancellation of the insurance policy and all the rights and privileges of either of the said Gabeharts under it; and that plaintiff be discharged of any obligation thereunder growing out of the matters and things alleged.

In defense of the suit, McKenzie, one of the defendants, admitting that he was involved in the collision and generally denying the allegation, prayed that plaintiff be denied the relief sought and required to defend the suit.

The defendants, J. A. and George Gabehart, admitted the issuance of the policy, and that the car had, as alleged, been transfered by J. A. Gabehart to George Gabehart, but denied that the transfer had effected any change in the legal obligations of the plaintiff under the policy to defend lawsuits growing out of the operation of the car by its then owner, George Gabehart.

Thereafter, plaintiff moved for a summary judgment on the ground that there was no issue of fact in that the undisputed facts established that long before the accident J. A. Gabehart had sold the automobile to his son, George Gabehart, and that at the time of the accident the Ford automobile was not owned, maintained, and used for and under the declarations stated and made a part of said policy.

The pleadings standing thus, the cause came on for trial, and was submitted upon stipulated facts.² 

Denying the motion for summary judgment, the district judge, on stipulated facts, determined the cause against the plaintiff and gave judgment accordingly.

As shown by his findings of fact, which of course follow the stipulation, and his conclusions of law, the court determined that because George Gabehart was an unemancipated minor and plaintiff had knowledge and notice of his minority and received an extra payment of premium when the policy was issued because when the policy was issued it was understood that George would drive the automobile, the company, by its acceptance of the higher premium waiver and was estopped to set up the defense.

Appealing from the judgment, the plaintiff, urging upon us that there is no basis in law or in fact for the finding or conclusion that the policy survived the transfer of title to George without notice thereof to and consent thereto being given by it, cites in support Bettinger v. N.W. National Cas. Co., 8 Cir., 213 F.2d 200; Byrd v. American Guarantee & Liability Ins. Co., 4 Cir., 180 F.2d 246; Maryland Cas. Co. v. Powers, D.C., 113 F. Supp. 126; Indemnity Ins. Co. v. Mahaffey, Tex.Civ.App., 231 S.W. 861; Ohio Cas. Co. v. Torres, Tex., 300 S.W.2d 947.

The appellee relying entirely upon such cases as Insurance Company of Texas v. Stratton, Tex.Civ.App., 287 S.W.2d 320 and our case of General Insurance Company of America v. Western Fire & Casualty Co., 5 Cir., 241 F.2d 289; Traders & General Ins. Co. v. Lucas, Tex.Civ.App., 281 S.W.2d 188; to which may be added Hartford Mut. Ins. Co. v. Gorbet, 5 Cir., 241 F.2d 363; urges upon us that while the general rule is as stated and claimed by the appellant, that a transfer of title without notice to and consent of the insurance company defeats the policy, the particular facts of this case make that rule inapplicable.

We do not think so. Those cases are without application under the agreed facts in this case. They are all cases in which it was found that the insurance company had knowledge of the situation and consented to it. It is stipulated that there was no knowledge of, or consent to, the transfer to George, and it is plain, indeed it is hornbook law that unless the terms of the policy are to be written out of it or disregarded, the judgment should have been for the insurance company. The fact that the company, if advised of the facts, might have accepted the situation and recognized the continuing existence of the policy is of no importance. It had a right under the policy to know any facts affecting the change of risk and to determine for itself whether by continuing the policy in force it would accept the changed risk. If the fact, made so much of by the appellee and the district judge, that the company had charged the higher premium applicable where use is by persons under twenty-five years of age because it was known that George, a minor, would sometimes drive the car, were material and we think it is not, it would but emphasize the fact that the company should have been informed that George had taken the car entirely over and given the right to determine whether it would accept the greatly increased risk attendant thereon.

Counsel have cited and to some extent discussed the Texas statutes dealing with the effect of marriage upon the disabilities of minority, and appellant has cited to us Pittman v. Times Securities, Tex.Civ.App., 301 S.W.2d 521, construing and holding that Section 3(t) of the Texas Probate Code, V.A.T.S., which went into effect on January 1, 1956, emancipated from the legal disabilities of minority both males and females. We do not think, however, that this is an important consideration here upon the validity of the contract, for, as a minor, George was entirely competent to contract for the purchase of the automobile and the contract was, and remained, valid until disaffirmed, and there is no evidence or even claim that it was disaffirmed. To the extent that the question of minority might be supposed to enter into the risk, it is equally unimportant because whether or not legally emancipated, he was in fact under twenty-five years of age.

The judgment is reversed and here rendered for appellant.

CAMERON, Circuit Judge (dissenting).

In the written application which constituted a part of the policy sought to be cancelled, the son, George Gabehart, was named as one who would use and operate the car which was the subject of the insurance. The company agreed to defend any suit filed and pay any judgment rendered against him. It received an extra premium for that protection. It has kept that premium and has not tendered it back in its action to cancel the policy.¹ 

As far as George was concerned, the company's liability was not affected by the transfer and any provisions the policy may contain relating thereto have no materiality. The company owed him the same protection before the transfer as after. The risk of the company in relationship

CAMERON, Circuit Judge (dissenting). or varied by the transfer.² 

None of the cases cited by the insurance company involved facts closely resembling those in the case before us.³  The naming of George in the application and the payment of an extra premium bring in a factor not heretofore dealt with and show, in my opinion, a clear purpose to protect him from liability under the facts before us. To blaze a trail by releasing the company from its policy obligation to protect George by applying a portion of its fine print under the facts set forth in the majority opinion is, I think, to exalt the 'letter which killeth' and to disregard the 'spirit which giveth life.'⁴  As to him, therefore, I think it is clear that the judgment of the lower court should be affirmed.

I think, moreover, that the judgment should be affirmed as to the father, J. A. Gabehart, the named insured, for failure of appellant to tender the unearned premium, a condition precedent to maintenance of an action for cancellation. I therefore dissent.