IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 97-10427
Summary Calendar
GAY LYNN UNDERWOOD; GARY WAYNE
UNDERWOOD,
Plaintiffs-Appellants,
versus
FRANKLIN LIFE INSURANCE COMPANY,
Defendant-Appellee.
Appeal from the United States District Court
For the Northern District of Texas
(1:96-CV-132-C)
October 27, 1997
Before KING, HIGGINBOTHAM, and DAVIS, Circuit Judges.
PER CURIAM:*
Plaintiffs Gay Lynn Underwood and Gary Wayne Underwood
appeal the take nothing judgment entered against them by the
district court in their diversity action against defendant
Franklin Life Insurance Company. We affirm.
In its findings of fact, the district court determined that
Franklin issued a life insurance policy in 1968, insuring the
life of one James E. Underwood for a face value of $25,000. The
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
policy owner was Citizens National Bank in Abilene, Texas, as
trustee for four trusts set up for Underwood's twin children, Gay
Lynn and Gary Wayne. If it matured as a death claim, the
insurance policy provided that its benefits should be directed to
Citizens National Bank as trustee for the Underwood trusts. The
policy never named James Underwood or the children as either
owners or beneficiaries. The policy provided that its ownership
or beneficiary terms could be altered if the owner filed a new
ownership or beneficiary designation at Franklin's home office.
By 1981, the trusts named in the policy had terminated
naturally. In 1981, 1989, and 1990, Franklin sent Citizens (and
its successors-in-interest) change of ownership and/or change of
beneficiary forms for the policy. Citizens and its successors
never executed these forms. In 1991, Franklin received a letter
from David Hooper, acting as an attorney for James Underwood.
Hooper enclosed a payment for the policy's annual premium and he
requested a change of ownership form; Franklin then requested
additional information from Hooper so that Franklin could prepare
the forms, but Hooper never responded.
On March 15, 1994, Hooper informed Franklin that James
Underwood had died on April 10, 1993. Knowing that the trusts
had terminated, on March 23, 1994, Franklin informed Hooper that
Franklin was going to pay the insurance benefits to James
Underwood's estate. Hooper responded by letter dated March 24,
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1994, in which he acknowledged the reasons for payment and the
payee and he provided Franklin with Letters Testamentary in which
Leonard Underwood was appointed Executor of the Estate of James
Underwood. On March 29, two weeks after it was notified of
Underwood's death, Franklin sent Hooper a check for $25,000,
payable to Leonard Underwood. The check was cashed on April 6,
1994.
On May 16, 1994, Franklin received a letter from plaintiff
Gay Lynn Underwood demanding payment of the insurance policy to
herself and her brother. The letter was prepared by David
Hooper, the same attorney who had just received the $25,000 on
behalf of James Underwood's estate. The district court found
that the proceeds of the policy had been paid by Franklin to
Underwood's estate with full knowledge of the plaintiffs.
Nevertheless, the plaintiffs sued Franklin, claiming they were
entitled to the insurance benefits and that Franklin should pay
out the benefits a second time.
The district court concluded that the plaintiffs were
entitled to no damages under the relevant Texas statutes for
Franklin's payment of the insurance benefits to the estate rather
than the plaintiffs. Alternatively, it held that the plaintiffs'
claim was barred by the doctrines of waiver, estoppel, and laches
because of their effective ratification of Franklin's payment to
the estate. Following trial, as per the district court's order,
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the independent executor entered into a stipulation, dividing the
$25,000 equally between Gay Lynn and Gary Wayne Underwood.
We find that the district court did not abuse its discretion
in awarding no damages to the plaintiffs based upon Franklin's
conduct. Franklin acted reasonably in this situation. It
repeatedly attempted to secure a change of ownership or
beneficiary for the insurance policy. Because the owner of the
policy never complied, Franklin was faced with the prospect of
paying insurance proceeds to a non-existent beneficiary.
Instead, it followed the sensible course of forwarding the
proceeds to the estate of the insured. Cf. Higgins v. McElvee,
680 S.W.2d 335, 342 (Mo. App. 1984).
In no way were the plaintiffs legally entitled to direct
payment by Franklin of the proceeds. The insurance policy
contained a provision requiring that any change of beneficiary be
secured by a written request to Franklin. No such request having
been made, the plaintiffs were not official beneficiaries of the
policy. Such change-of-beneficiary provisions in insurance
contracts are binding on the courts. See Teaff v. Ritchey, 622
S.W.2d 589, 593 (Tex. App.--Amarillo 1981, no writ).
Plaintiffs claim damages from Franklin for violation of the
prompt payment statute of the Texas Insurance Code. Tex. Ins.
Code art. 21.55(6). The prompt payment statute, however,
provides for damages when an insurer fails to pay on a claim made
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by an insured, a policyholder, or a beneficiary of the policy.
As the plaintiffs were neither the insured, policyholders, nor
beneficiaries, they have no redress under the statute.
Finally, as the district court found, the plaintiffs had
full knowledge that Franklin was to pay the proceeds to James
Underwood's estate. Yet they made no effort to prevent Franklin
from doing so. Rather, by allowing their attorney to deliver the
proceeds of the policy to the executor, the plaintiffs ratified
Franklin's actions. Their claims for damages are barred by the
doctrines of ratification, estoppel, and waiver. See, e.g.,
Southwestern Investment Co. v. Alvarez, 442 S.W.2d 862, 866 (Tex.
Civ. App.--El Paso 1969, reformed by deleting punitive damages
and affirmed, 453 S.W.2d 138 (Tex. 1970)) (estoppel); Ford v.
Culberson, 308 S.W.2d 855, 864-65 (Tex. 1985) (waiver); Branham
v. Prewitt, 636 S.W.2d 507, 512 (Tex. App.--San Antonio 1982,
writ ref'd n.r.e.) (ratification). Nor do plaintiffs deserve any
attorneys' fees.
AFFIRMED.
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