It seems to be conceded by defendant in error in his brief that the answers set out in the statement above should be held to have operated as affirmative warranties; and, when considered, as they must be, with reference to the recitals in the policies and the stipulations in the application for same set out in said statement, it is plain they must be held to have so operated. Supreme Lodge K. L. of H. v. Payne,101 Tex. 455, 108 S.W. 1160, 15 L.R.A. (N.S.) 1277; Insurance Co. v. Pinson, 94 Tex. 554, 63 S.W. 531; 3 Cooley's Briefs on Insurance, p. 1935. While there is much authority for saying that such warranties being in the nature of conditions precedent to the validity of the policy must be literally true, otherwise the contract is not enforceable (3 Cooley's Briefs on Insurance, p. 1950), the better rule, it seems to us, is that they need not be literally true, but are sufficiently complied with if substantially true. 25 Cyc. 802; Insurance Co. v. Pinson, supra,94 Tex. 556, 63 S.W. 531.
Treating the answers as warranties, the first question is: Were they substantially true? If they were not, then, without reference to their materiality, it must be said that appellant was entitled to treat the contracts as forfeited. Insurance Co. v. Simpson, 88 Tex. 333, 31 S.W. 501,28 L.R.A. 765, 53 Am.St.Rep. 757; Flippen v. Insurance Co.,30 Tex. Civ. App. 362, 70 S.W. 788; Insurance Co. v. Terry,37 Tex. Civ. App. 486, 84 S.W. 657; Insurance Co. v. Coalson,22 Tex. Civ. App. 64, 54 S.W. 392; 25 Cyc. 805; 3 Cooley's Briefs on Insurance, p. 1951; 1 Page on Contracts, p. 107.
That the answer of the insured in his application that he resided and was born in "Big Sandy, Upshur county, Texas," literally was not true is not disputed; but the contention is made by appellee that, though not literally true, the answer was a "reasonable one," and therefore sufficient. It may have been a reasonable answer to the question propounded, but whether it was or not is not the question. To satisfy the warranty, it must have been at least substantially true. Keeping in mind the fact that we are not permitted to consider the materiality vel non of the question as to where the insured was born and resided, but can only inquire as to whether the answer he made, without reference to its materiality, was true or substantially true or not, we feel bound to say that it was neither. He did not reside and was not born in Big Sandy, or in any territory which by any stretch of the imagination could be regarded as a part of or even as
contiguous to that town. The answer was as wholly untrue as it would have been if, instead of declaring that insured was born and resided at a point seven miles from Big Sandy, it had declared that he was born and resided at a point 50 or 100 miles from that town. In the Pinson Case, cited above, the insured answered that he had five living sisters, aged, respectively, 52, 50, 47, 45, and 36 years. The truth was that the ages of his sisters, respectively, were 49, 46, 44, 36, and 33 years. The Supreme Court said: "The rule that a substantial performance of a warranty is sufficient does not apply in this case, and we are not called upon to say what would be the effect if the variance between the actual ages and the ages warranted was very slight. Lest the opinion might be misunderstood, we will state that we do not intend to assert that a literal compliance with such a warranty would be necessary, but in our opinion the facts do not justify the court in assuming that the discrepancy in the ages is so irrelevant as to avoid the effect of the warranty." In Hutchinson v. Insurance Co., 39 S.W. 325, the insured answered that his place of residence was "Kyle, Hays county, Tex." The truth was that he resided in the country about 12 miles from Kyle. It was held that the answer was a false one, and, being a warranty, that the contract was thereby avoided.
The testimony was undisputed that the insured when a boy 15 or 16 years of age worked as a hand at a still used by his father in manufacturing intoxicating liquor. This being true, must it be said that his answer that he had never been "engaged in or connected with the manufacture or sale of malt or spirituous liquors" was false? So far as it declared he had never been "engaged in the manufacture" of such liquors, we think the answer reasonably might be construed as meaning that he had never been so engaged on his own account, and so far was true. But the words "connected with" had a broader meaning, and we think a conclusion that the answer was false in so far as it declared that the insured had never been "connected with the manufacture" of such liquors cannot be escaped. Dwight v. Insurance Co., 103 N.Y. 341, 8 N.E. 656, 57 Am.Rep. 729. As authorizing a contrary conclusion, appellee cites Collins v. Insurance Co., 32 Mont. 329, 80 P. 609, 108 Am.St.Rep. 578, Guiltinan v. Insurance Co., 69 Vt. 469, 38 A. 315, and Insurance Co. v. Fraser, 76 F. 705, 22 C.C.A. 499. The Collins Case is the nearest in point, but we think is of no value in construing the warranty relied on here. In that case the insured had stated his occupation to be "proprietor of a restaurant," and had then declared that he was "not in any way connected with the manufacture or sale of ale, wine or liquor." It appeared that the insured's restaurant was in the rear end of a room divided by a partition into two parts; that one Nelson kept a saloon in the front part of the room; that Nelson boarded with the insured; and that sometimes, while Nelson was taking his meals, to accommodate him, the insured would wait on customers at the bar, and, when Nelson was called out temporarily during the day, would perform, gratuitously, a like service for him. The court reached the conclusion that the facts recited did not show the assured to have been "connected with" the sale of liquor, saying: "The evident purpose of requiring the declaration in the application was to inform the company exactly as to the business connections of the applicant, so that it, through its agents, could determine whether or not the risk was a suitable one. From this point of view — and we think it the proper one — the statement was true."
In stating his "full family history," the insured answered that he then had three brothers and two sisters living, and a brother, but no sister, dead. It was conclusively shown that he then had two brothers of the whole blood and five brothers of the half blood living, and a brother of the whole blood dead; and that he had two sisters of the whole blood living, and one sister of the half blood dead. His "full family history," it clearly appeared, therefore, was not given, and reasonably the answer could not be otherwise construed than as untrue, in the sense that it was incomplete and failed to disclose all the information the inquiry called for. It cannot be doubted that his "full family history" should be held to include the history his brothers and sisters of the half blood.
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It seems to be conceded by defendant in error in his brief that the answers set out in the statement above should be held to have operated as affirmative warranties; and, when considered, as they must be, with reference to the recitals in the policies and the stipulations in the application for same set out in said statement, it is plain they must be held to have so operated. Supreme Lodge K. L. of H. v. Payne,101 Tex. 455, 108 S.W. 1160, 15 L.R.A. (N.S.) 1277; Insurance Co. v. Pinson, 94 Tex. 554, 63 S.W. 531; 3 Cooley's Briefs on Insurance, p. 1935. While there is much authority for saying that such warranties being in the nature of conditions precedent to the validity of the policy must be literally true, otherwise the contract is not enforceable (3 Cooley's Briefs on Insurance, p. 1950), the better rule, it seems to us, is that they need not be literally true, but are sufficiently complied with if substantially true. 25 Cyc. 802; Insurance Co. v. Pinson, supra,94 Tex. 556, 63 S.W. 531.
Treating the answers as warranties, the first question is: Were they substantially true? If they were not, then, without reference to their materiality, it must be said that appellant was entitled to treat the contracts as forfeited. Insurance Co. v. Simpson, 88 Tex. 333, 31 S.W. 501,28 L.R.A. 765, 53 Am.St.Rep. 757; Flippen v. Insurance Co.,30 Tex. Civ. App. 362, 70 S.W. 788; Insurance Co. v. Terry,37 Tex. Civ. App. 486, 84 S.W. 657; Insurance Co. v. Coalson,22 Tex. Civ. App. 64, 54 S.W. 392; 25 Cyc. 805; 3 Cooley's Briefs on Insurance, p. 1951; 1 Page on Contracts, p. 107.
That the answer of the insured in his application that he resided and was born in "Big Sandy, Upshur county, Texas," literally was not true is not disputed; but the contention is made by appellee that, though not literally true, the answer was a "reasonable one," and therefore sufficient. It may have been a reasonable answer to the question propounded, but whether it was or not is not the question. To satisfy the warranty, it must have been at least substantially true. Keeping in mind the fact that we are not permitted to consider the materiality vel non of the question as to where the insured was born and resided, but can only inquire as to whether the answer he made, without reference to its materiality, was true or substantially true or not, we feel bound to say that it was neither. He did not reside and was not born in Big Sandy, or in any territory which by any stretch of the imagination could be regarded as a part of or even as
contiguous to that town. The answer was as wholly untrue as it would have been if, instead of declaring that insured was born and resided at a point seven miles from Big Sandy, it had declared that he was born and resided at a point 50 or 100 miles from that town. In the Pinson Case, cited above, the insured answered that he had five living sisters, aged, respectively, 52, 50, 47, 45, and 36 years. The truth was that the ages of his sisters, respectively, were 49, 46, 44, 36, and 33 years. The Supreme Court said: "The rule that a substantial performance of a warranty is sufficient does not apply in this case, and we are not called upon to say what would be the effect if the variance between the actual ages and the ages warranted was very slight. Lest the opinion might be misunderstood, we will state that we do not intend to assert that a literal compliance with such a warranty would be necessary, but in our opinion the facts do not justify the court in assuming that the discrepancy in the ages is so irrelevant as to avoid the effect of the warranty." In Hutchinson v. Insurance Co., 39 S.W. 325, the insured answered that his place of residence was "Kyle, Hays county, Tex." The truth was that he resided in the country about 12 miles from Kyle. It was held that the answer was a false one, and, being a warranty, that the contract was thereby avoided.
The testimony was undisputed that the insured when a boy 15 or 16 years of age worked as a hand at a still used by his father in manufacturing intoxicating liquor. This being true, must it be said that his answer that he had never been "engaged in or connected with the manufacture or sale of malt or spirituous liquors" was false? So far as it declared he had never been "engaged in the manufacture" of such liquors, we think the answer reasonably might be construed as meaning that he had never been so engaged on his own account, and so far was true. But the words "connected with" had a broader meaning, and we think a conclusion that the answer was false in so far as it declared that the insured had never been "connected with the manufacture" of such liquors cannot be escaped. Dwight v. Insurance Co., 103 N.Y. 341, 8 N.E. 656, 57 Am.Rep. 729. As authorizing a contrary conclusion, appellee cites Collins v. Insurance Co., 32 Mont. 329, 80 P. 609, 108 Am.St.Rep. 578, Guiltinan v. Insurance Co., 69 Vt. 469, 38 A. 315, and Insurance Co. v. Fraser, 76 F. 705, 22 C.C.A. 499. The Collins Case is the nearest in point, but we think is of no value in construing the warranty relied on here. In that case the insured had stated his occupation to be "proprietor of a restaurant," and had then declared that he was "not in any way connected with the manufacture or sale of ale, wine or liquor." It appeared that the insured's restaurant was in the rear end of a room divided by a partition into two parts; that one Nelson kept a saloon in the front part of the room; that Nelson boarded with the insured; and that sometimes, while Nelson was taking his meals, to accommodate him, the insured would wait on customers at the bar, and, when Nelson was called out temporarily during the day, would perform, gratuitously, a like service for him. The court reached the conclusion that the facts recited did not show the assured to have been "connected with" the sale of liquor, saying: "The evident purpose of requiring the declaration in the application was to inform the company exactly as to the business connections of the applicant, so that it, through its agents, could determine whether or not the risk was a suitable one. From this point of view — and we think it the proper one — the statement was true."
In stating his "full family history," the insured answered that he then had three brothers and two sisters living, and a brother, but no sister, dead. It was conclusively shown that he then had two brothers of the whole blood and five brothers of the half blood living, and a brother of the whole blood dead; and that he had two sisters of the whole blood living, and one sister of the half blood dead. His "full family history," it clearly appeared, therefore, was not given, and reasonably the answer could not be otherwise construed than as untrue, in the sense that it was incomplete and failed to disclose all the information the inquiry called for. It cannot be doubted that his "full family history" should be held to include the history his brothers and sisters of the half blood.
We have thus reached the conclusion that there was a breach of each of the warranties. But appellant might have waived the forfeiture it had a right to declare, so as to entitle appellee to recover on the policies in spite of the forfeiture. The next question, therefore, is: Was the testimony sufficient to support a finding that appellant waived the forfeiture?
Appellee's contention that the testimony was sufficient to justify a finding that appellant's soliciting agent, Tom B. Blackstone, knew the truth about the matters covered by the warranties at the time he delivered the policies to the insured, and that the delivery by him of the policies with such knowledge was a waiver which bound appellant cannot be sustained. In the first place, it did not appear from the testimony that said agent at the time he delivered the policies knew the insured had ever been connected with the manufacture of intoxicating liquor. If the delivery by him of the policies at a time when he knew the other warranties had been breached should be treated as a waiver by plaintiff in error of those breaches, it should not be treated as a waiver by plaintiff in error of the breach of which it did not appear he had knowledge. "A waiver by an insurer of a ground of forfeiture of which it has knowledge will not constitute a waiver of
another ground of forfeiture of which it has no knowledge." 3 Cooley's Briefs on Insurance, p. 2469; Insurance Co. v. Moriarty, 36 S.W. 943. In the second place, it seems to be the law that an agent of an insurance company only authorized, as said Tom B. Blackstone was, to "solicit insurance, deliver policies, and collect premiums, cannot, after the execution of a policy, waive any of its conditions." 3 Cooley's Briefs on Insurance, p. 2484.
Was the testimony sufficient, as defendant in error contends it was, to support a finding that plaintiff in error, after the death of the insured, with knowledge of the facts entitling it to avoid the policies, waived the forfeiture? It was sufficient to show that plaintiff in error, through its general agent, one Thorp, admitted it was liable on the policies; but Thorp testified, and his testimony was not contradicted by any other testimony we have been able to find in the record, that he never knew until several months after the plaintiff in error through him had paid $5,000 to defendant in error on account of the policies, that the insured had ever been connected with the manufacture of intoxicating liquors. It was not pretended that plaintiff in error in any other way than through Tom B. Blackstone, as stated above, and through Thorp, had any knowledge that the warranties or any of them had been breached by the insured. It therefore appeared by the undisputed testimony that at the time the waiver asserted was claimed to have occurred plaintiff in error had no knowledge of the breach by the insured of the warranty based on his answer that he had never been connected with the manufacture of intoxicating liquors. Without such knowledge on its part, it cannot be said that plaintiff in error had waived this ground of forfeiture. "It is essential that a company should have had some knowledge of the forfeiture, before it can be held to have waived it" Field, J., in Insurance Co. v. Wolff, 95 U.S. 326, 24 L.Ed. 389. And see Brotherhood of Railroad Trainmen v. Roberts, 48 Tex. Civ. App. 325, 107 S.W. 627; Insurance Co. v. Wright, 125 S.W. 363; 25 Cyc. 865; 3 Cooley's Briefs on Insurance, pp. 2467, 2468, 2469.
It thus appearing that one of the grounds upon which plaintiff in error had a right to declare a forfeiture of the contract had never been waived, without reference to whether the breaches of the other warranties had been waived or not, it must be held that plaintiff in error was not precluded from asserting the invalidity of the policies, as against the claim here made by appellee; for, as before stated, a waiver by plaintiff in error of a ground of forfeiture known to it would not operate as a waiver of a ground unknown to it. Insurance Co. v. Moriarty, 36 S.W. 943; Insurance Co. v. Loyd, 67 Ark. 584, 56 S.W. 45, 77 Am.St.Rep. 136; 3 Cooley's Briefs on Insurance, p. 2469. Plaintiff in error having asserted in this suit, as it had a right to, the invalidity of the policies, and it appearing that they were invalid, defendant in error should have been, denied the recovery he sought.
The conclusion reached will lead to a reversal of the judgment, and would dispose of the appeal without further consideration of the record but for the complaint of plaintiff in error based on the refusal of the trial court to instruct the jury to find in its favor on its cross-action, whereby it sought to recover back the $5,000 it had paid to defendant in error. We do not think it was entitled to recover back the money it had paid. It was not induced to issue the policies because of any fraud practiced upon it. Shirk v. Mitchell, 137 Ind. 185, 36 N.E. 852. It did not pretend that it was induced to pay the $5,000 to defendant in error because of any misconduct on his part. The contention was that the payment was made because of a mistake on its part due to its ignorance of the facts entitling it to avoid the policies. The question was made before the Court of Appeals of New York in Insurance Co. v. Minch,53 N.Y. 147. In disposing of it, the court said: "A policy of insurance is an executory contract. The time for insisting upon, the breach of any warranty contained in the original application was when the claim was made for the execution of the contract. Mere ignorance of a fact which might have enabled the company to defend an action upon the policy on account of such breach is not such a mistake of fact as will enable it to recover back the money. It will be presumed that the company either knew the fact or intended to waive any such defense, and voluntarily paid the money. Otherwise there would be no end of controversy and litigation, and the party receiving the money would hold it subject to a lawsuit until the statute of limitations intervened." And see Stache v. Insurance Co.,49 Wis. 89, 5 N.W. 36, 35 Am.Rep. 772; Smith v. Insurance Co., 62 N.Y. 86; Insurance Co. v. Parham, 80 Tex. 518, 16 S.W. 316.
We sustain plaintiff in error's second assignment of error, and, reversing the judgment of the court below, will here render judgment that defendant in error take nothing by his suit, and that plaintiff in error recover its costs.
On Motion for Rehearing.
In the opinion, in discussing the question, made as to the insured's connection with the manufacture of intoxicating liquor, this statement was made: "The testimony was undisputed that the insured when a boy 15 or 16 years of age worked as a hand at a still used by his father in manufacturing intoxicating liquor." The statement is challenged as unfair to defendant in error. We believe it is, in so far as it asserts that the testimony was undisputed that the insured when he worked as a hand at the still was as old as 15 or 16 years. Defendant in error was the only witness who testified as
to the insured's work at the still. On his cross-examination by plaintiff in error defendant in error's testimony was as follows: "Well, as to when I was engaged in the liquor business, it has been about 8 or 10 years. I was engaged in the business with my two brothers Steve B. Blackstone and Mark Blackstone. As to when I ceased to have any connection with the business, well, as far as the connection goes, the still is there yet, but there has not been any whisky made there by any of the family in, I don't know, it must have been six or eight years. I could not say exactly. The still is on my place. A brother of mine done the distilling. Brother Mark done the distilling. He is a single man. Yes, sir; my son Harvey A. Blackstone was about the still when he was a kid. He was there, of course. As to what he did in connection with the still, I would say nothing hardly ever. Sometimes he worked there as a hand. Sometimes he went there and worked about there, but he did not know anything about making whisky." On his redirect examination by his own counsel, defendant in error testified: "I couldn't say how long it has been since I engaged in the manufacture of whisky, operating a still out there. It must be six or eight years. Q. Why, hasn't it been 16 or 17 years, to refresh your memory? A. Yes; let me see, I believe we made whisky there in `92. It has been longer than I thought it had, or the time slipped off with me. It has been longer than I thought it was. Harvey was 22 the day before he was killed, and you can go back and sorter tell now old he was then. It has been longer than I thought it was. I couldn't tell. I know the whole business was run down. Yes, sir; it was a licensed still. We had a government man with us all the time. I couldn't say how old Harvey was when he worked around there. He was mighty little, but I think he used to help us with the peaches or apples. I think he worked around there some. It seems to me he did. No, sir; I don't think `92 is about the last year. I think that was the year we put up the still and commenced making, and we never made any corn whisky only that one year. We never made anything but brandy after that. No, sir; Harvey wasn't engaged in the manufacture or sale, or connected with the manufacture or sale to my knowledge after he reached 21." The insured was killed in August, 1909. He reached the age of 22 years the day before he was killed. The testimony quoted was given in June, 1910.
The conclusion reached by this court that the testimony showed a breach by the insured of the warranties set up by the plaintiff in error as a reason why a recovery on the policies should be denied is assailed as unreasonable. We do not think so. It was reached in deference to the rule we understand to be established in this state that, without reference to their materiality, such warranties in such a contract, if not literally, must be substantially, true, otherwise the contract cannot be enforced by the party intended to be indemnified by it. We agree that the rule is unreasonable when applied to the facts of such cases as the Hutchinson and Pinson Cases, cited in the opinion, and when applied to the facts of this case. If we were authorized to do so, we would not hesitate to so change it as to require in cases like those and this one, conclusions radically different from those reached. But, so long as the rule remains unchanged, we cannot do otherwise than enforce it. Therefore the motion is overruled.