Opinion
35399, 35406.
DECIDED FEBRUARY 28, 1955.
Action on insurance contract. Before Judge Smith. Berrien Superior Court. August 30, 1954.
Robert H. Jones, Franklin, Eberhardt Barham, Wilby C. Coleman, for plaintiff in error.
L. J. Courson, J. C. McDonald, contra.
( a) Where, as here, a party who is in privity to a contract brings suit against the other party to the contract on a cause of action arising therefrom, but for the use and benefit of a third party, the party in whose name the action is brought is the real plaintiff, and any defense which the defendant has against that plaintiff may be urged. Accordingly, the bank here is the real plaintiff, and the defense of estoppel applicable against the bank may properly be urged, to the prejudice of the use.
( b) The stipulation showing the estoppel of the bank to contend that the policy of insurance was not canceled in strict compliance with its terms was not inadmissible for any of the reasons interposed by the objections thereto. Accordingly, the trial court did not err in considering this evidence, but the judgment of the trial court in favor of the plaintiff was error.
DECIDED FEBRUARY 28, 1955.
Citizens Bank of Nashville, Georgia, brought an action for the use and benefit of Mrs. Annie Laurie Mathews, as temporary administratrix of the estate of J. Frank Mathews, deceased, against Southern Life Insurance Company of Georgia; on a policy of life insurance on the life of said deceased. The petition alleges in substance that it loaned the deceased $2,500 and procured life insurance from the defendant in the amount of the loan and during the period of time it was to run on the life of the deceased. This policy provided that "the company may cancel the insurance on the life of any borrower at any time within 30 days from the date the registration sheets reach the home office of the company by giving written notice to the creditor and by refunding the premium paid."
The defendant in its answer sets up allegations to the effect that the policy of insurance was canceled as to J. Frank Mathews within the time and under the provision of the policy authorizing such cancellation.
The case was tried on an agreed statement of facts, which disclosed that J. Frank Mathews died before the note evidencing his indebtedness to the plaintiff became due, and that his widow, the temporary administratrix of his estate for whose use and benefit this suit is maintained, paid the bank. The stipulation of facts as set forth discloses that, within 30 days from the date it received a registration sheet showing a list of the bank's debtors, including the named J. Frank Mathews, the same was returned to the bank with the word "Canceled" and the date written immediately above the name "J. Frank Mathews"; that, on the next day and still within the 30-day period, the bank received a letter from the insurance company as follows: "We regret that on and after this date the individual named below will not be acceptable for credit life insurance." The name of the individual listed below is that of J. Frank Mathews. No notice was ever sent Mathews of any attempt to cancel this insurance, by either the defendant or the plaintiff, and he had no knowledge or information about the insurance not being in full force and effect; but, under the terms of the policy, none was required to be given him. The original premium for the insurance which had been paid by him was refunded by the defendant to the bank and credited by the latter on his note before it became due and also without his knowledge. The following stipulation also appears in the agreed statement of facts: "The bank and defendant both understood by the procedure above set forth that the said policy of life insurance had been canceled on November 29, 1951, by the defendant as to the life of the said J. Frank Mathews and that, on and after that date, his life was no longer insured under said policy. The defendant had previously by substantially the same procedure as above set forth, undertaken to cancel the insurance under said policy as to the lives of certain of the other borrowers from the bank where the defendant had investigated whether such borrowers were good life insurance risks under said policy, and where defendant ascertained by such investigation that such borrowers were not good life insurance risks under such policy. In each of such instances, the bank and defendant both understood that the said life insurance policy was thereby canceled as to `the life of each of such borrowers and that the life of each of such borrowers was no longer insured under said policy.'"
The foregoing quoted portion of the stipulation was objected to by the plaintiff on grounds substantially as follows: (1) as being irrelevant and immaterial insofar as the plaintiff is concerned, as such understanding between the bank and the defendant would not be binding upon the plaintiff or the deceased; (2) as such understanding is not binding upon the plaintiff or J. Frank Mathews, it not appearing that said J. Frank Mathews had any knowledge of such procedure in other cases; (3) that the understanding between the bank and the defendant as to how its life-insurance policies were canceled on lives of other borrowers is not material or binding on J. Frank Mathews, it appearing that he had no notice of such course of conduct; (4) that the stipulation constituted an attempt to vary or change by parol evidence the effect of the written notice from the insurance company to the bank relating to J. Frank Mathews; (5) that the notice could not be changed by any understanding between the bank and the insurance company to which J. Frank Mathews was not a party and of which he had no notice; (6) that the effect of such notice is a matter to be determined by the court from the notice itself, and not from any understanding between the insurance company and the bank of which J. Frank Mathews had no knowledge.
The court overruled these objections and entered a judgment in favor of the plaintiff. The main bill of exceptions is to this judgment, and the cross-bill of exceptions assigns error on the overruling of the objections to evidence, reference to which has hereinabove been made.
This is an action brought by a party who is in privity to the contract for the use and benefit of another party who is not. Accordingly, the amendment of 1949 to Code § 3-108 (Ga. L. 1949, p. 455) adding the last sentence, which provides that "The beneficiary of a contract made between other parties for his benefit may maintain an action against the promissor on said contract," does not apply here. Whether the administratrix of the estate of J. Frank Mathews had such an interest in this insurance policy as to maintain an action on it in her own name is not before us. The remainder of this Code section prior to amendment reads as follows: "As a general rule, the action on a contract, whether express or implied, or whether by parol or under seal, or of record, shall be brought in the name of the party in whom the legal interest in such contract is vested, and against the party who made it in person or by agent."
Since this contract was made by the bank and the insurance company and since the bank proceeds in its own name, for the use of the administratrix of J. Frank Mathews, the bank is the real plaintiff, and any defense which the insurance company has against the bank may be urged. Hill v. Shaw, 189 Ga. 294 ( 5 S.E.2d 778); Joiner v. Singletary, 106 Ga. 257, 260 ( 32 S.E. 90). "Although a plaintiff having a right of action against another may sue for the use of any person whom he may designate to take the proceeds of the action, a plaintiff having no right of action at all cannot recover either for his own benefit or for the use of anyone else." Terrell v. Stevenson, 97 Ga. 570 ( 25 S.E. 352). "In order to maintain a suit for the use of another, there must be a legal right of action in favor of the party bringing the suit and against the party who is sued and from whom recovery is sought." King v. Prince, 89 Ga. App. 588 ( 80 S.E.2d 222) (decided since the 1949 amendment to Code § 3-108, supra). "It does not convert such fatally defective petition into a good cause of action if such plaintiff bring the suit `for the use' of another. To maintain a suit for the use of another there must be a legal right of action in the party bringing the suit." National Ben Franklin Fire Ins. Co. v. McGann, 170 Ga. 573 ( 153 S.E. 362). See also Tyler v. National Life c. Co., 48 Ga. App. 338 ( 172 S.E. 747); Franklin v. Mobley, 73 Ga. App. 245 ( 36 S.E.2d 173); Browder v. Cox, 83 Ga. App. 738 ( 64 S.E.2d 460); Norwich Union Fire Ins. Soc. v. Wellhouse, 113 Ga. 970 ( 39 S.E. 397); State v. Bank of Quitman, 117 Ga. 849 ( 45 S.E. 236). The defendant urges the defense that the policy had been canceled according to its terms. If this is true, the plaintiff cannot recover either for itself or for the use of the administratrix; or if for any reason the bank by a course of conduct is estopped to contest this defense, the effect is the same. Without determining whether or not the policy was actually canceled in accordance with its strict terms, the stipulation of facts, made the subject of the plaintiff's cross-bill of exceptions, is such as to constitute an estoppel of the plaintiff to contend that the policy of insurance was not canceled; and that part of the stipulation relied upon to constitute estoppel is objected to and the admissibility thereof as evidence is questioned as above set forth. Code § 20-116 provides: "Where parties, in the course of the execution of a contract, depart from its terms and pay or receive money under such departure, before either can recover for failure to pursue the letter of the agreement, reasonable notice must be given the other of intention to rely on the exact terms of the agreement. Until such notice, the departure is a quasi new agreement." Waiver results from a relinquishment of a known right, and where, by a course of conduct, one leads another to believe that he will not insist upon the strict terms of the contract, he will not be heard to complain because the other contracting party relies upon his acquiescence as evidenced by a course of conduct in similar situations. Adams v. Washington Fidelity Nat. Ins. Co., 48 Ga. App. 753 ( 173 S.E. 247); Morrison v. Roberts, 195 Ga. 45 ( 23 S.E.2d 164). Accordingly, the evidence as to the previous course of conduct of the insurance company, accepted by the bank, of cancelling out certain named debtors from the lists submitted by the bank under the coverage of its master policy was admissible, and had the effect of estopping the bank from complaining, in an action against the insurance company, that the latter had not complied strictly with the policy provisions as to cancellation.
The judgment of the trial court overruling the objection to a portion of the stipulation of facts is without error; but the trial court erred in entering a judgment in favor of the plaintiff bank.
Judgment reversed on main bill of exceptions and affirmed on cross-bill of exceptions. Felton, C. J., and Nichols, J., concur.