Clayton v. S.W. Life Ins. Co. , 158 S.W.2d 820 ( 1942 )

I am not in accord with the holding of the majority; the judgment of the court below should be affirmed.

The two policies of insurance involved in this suit were term policies on the life of Martin McBride, expiring in ten years from their dates unless matured by death before that time. The policies were dated March 1, 1932. Clearly, at that date, W.M. McBride, Inc. (beneficiary named in the policies), had a valuable insurable interest in the life of the insured, and if the insured had died during the life of the corporation and when it had an insurable interest, the proceeds of the policies would undoubtedly have gone to the corporation, or its stockholders. The policies were taken out primarily for the benefit of the corporation.

The record shows that the insured, Martin McBride, and appellees, Helen Clayton and Linna Mae McNeil, were the sole stockholders of the corporation, and Mr. McBride its sole director. On December 15, 1937, the stockholders filed with the Secretary of State articles of dissolution, showing that the corporation had voluntarily dissolved, all debts paid and its assets distributed among the three stockholders as they devised. A brick building in the City of Greenville and 16 shares of stock, of the par value of $10 per share, in Employers' Casualty Company, owned by the corporation, were not partitioned among the stockholders, nor were they partitioned at the time of trial in October, 1940. Mr. McBride managed the store building, collected the rents and deposited the money in a bank up to about the time of his death; and since that time, by common consent, Helen Clayton has managed the building, collected and deposited the rents for the joint account of the owners. Hence, I think that, at the death of the insured, December 6, 1939, the corporation was dead, and the undivided property was in the possession of the owners, as tenants in common. After the corporation had lost its existence, the director and sole stockholders were vested with title to all remaining property, as against all persons except creditors of the corporation, and where there were no creditors, the full title vested in the director and stockholders as tenants in common. The corporation and stockholders were distinct entities in the eyes of the law; hence the corporation had no interest in the property vesting in the stockholders.

On April 6, 1938, Mr. McBride, evidently recognizing the dissolution of the corporation, that no further corporate affairs remained to be administered by its director or trustee, and that the corporation had no longer an insurable interest in his life, and being conscious of the fact that he had become "wholly and permanently disabled" to attend to any business, caused the beneficiary in the policies to be changed — policy 288911 to his wife, Rose Agnes McBride, and policy 288912 to his children, Martin McBride, Jr., and Warren McBride. The policies provide: "The insured may have any beneficiary of this policy changed, and a new beneficiary designated by endorsement hereon at any time while the policy is in force and not assigned, upon making written application for such change at the Home Office of the Company. The change shall take effect, and all interest of the former beneficiary shall cease, only upon the making of such endorsement by the Company."

However, irrespective of the legal effect of the change of beneficiary in the policies, it is well settled in this state that it is against public policy to allow a party who has no insurable interest to be the owner of a policy of insurance upon the life of a human being; and further, if the insurable interest should cease before the death of the insured, then the whole of the policy will go to the estate of the insured. Cheeves v. Anders, 87 Tex. 287, 28 S.W. 274, 47 Am. St. Rep. 107; Price v. Knights of Honor, 68 Tex. 361, 4 S.W. 633; Schonfield v. Turner, 75 Tex. 324, 12 S.W. 626, 7 L.R.A. 189; Hatch v. Hatch,35 Tex. Civ. App. 373, 80 S.W. 411.

The record shows that W. M. McBride, Inc., was formed for the purpose of buying and selling goods at retail, and in furtherance of such business, at the date the policies were issued, operated several stores, with Mr. McBride as its managerial head; and in 1937 only one of these stores was then being operated. Subsequently, this store was destroyed by fire; settlement was made with the insurance company that carried the loss; all debts of the corporation paid and the balance of the assets in cash distributed to the three stockholders. From that time forward, Martin McBride never operated any business; he was wholly and permanently disabled. Under these facts, there were no corporate affairs to be administered by Mr. McBride. It has been repeatedly held that where a corporation is dissolved without creditors, and no further corporate affairs are to be administered, its property passes to the stockholders; and where the stockholders stand as trustees, as in this case, they are merely holding the property as tenants in common, and may validly convey it in that capacity. In the absence of creditors, the property is subject to the tenants' (trustees') contracts and may be subjected to their respective debts. Montgomery v. Heath, Tex. Civ. App. 283 S.W. 324; Bacon v. National Bank of Commerce, Tex. Civ. App. 259 S.W. 244.

Furthermore, the policies of insurance involved here, being 10-year term policies (expiring in 1942), and there being no unfinished corporate business, no creditors, no suits or litigation, and the insured being wholly and permanently disabled, manifestly, the corporation, if it owned the policy, would be more pecuniarily interested in the termination of the insured's life than the continuation thereof. Indeed, it is generally held that a corporation has an insurable interest in the life of an officer on whose services the corporation depends for its prosperity, and whose death would be a substantial loss to it. The mere fact, however, that an officer is president, director, or manager of a corporation, is not sufficient to establish an insurable interest where it does not further appear that the success of the business is dependent upon the life of such officer. In this case, it can hardly be said that Mr. McBride was performing any service for the corporation or its stockholders after the dissolution of the corporation, and no corporate business was then dependent upon his life. Therefore, the corporation, as a matter of law, had a direct interest in his death, and not in his life. If he had lived until March 1, 1942, the corporation or its directors and stockholders would have received nothing on the policy; only in his death was it interested. Hence the corporation's interest was directly contrary to the public policy of this state.

I fully recognize that under a statutory extension of life of a dissolved corporation (1388, R.C.S.), it may exercise the powers enumerated in the Act, which are reasonably incident to the purpose of the extension; namely, to wind up the corporation and liquidate its affairs. The power to sue and be sued is quite generally included. Such is the holding of the Amarillo Court of Civil Appeals in Waggoner v. Edwards, 68 S.W.2d 655, 659, cited by the majority. But such corporations are not authorized to continue the business for which they were established, or to acquire or engage in any new business transaction. The time limit does not apply unless the circumstances are such as to bring the corporation's affairs within the provision of the statute. Thus, where the Act declares that the directors, as trustees, may continue the corporation for three years with power to settle the affairs, and the record shows that the affairs have been settled before that time, all debts paid, and the property owned by the corporation placed in joint possession of the stockholders, the corporation has no longer any existence. Dissolution of the corporation is the termination of its corporate existence; liquidation implies the winding up of the affairs of the corporation with its creditors, and making disposition of its assets. In this case, the dissolution was declared under the statute, all debts had been paid and the property remaining distributed, or placed in the possession and control of the rightful owners, the three stockholders, and, so far as this record shows, the property is now in their joint possession as tenants in common. Mr. McBride contracted with reference to his interest, and Mrs. Clayton is managing the property for the joint account of all. The total extinction of the corporate entity has been accomplished. The store building and 16 shares of stock in Employers' Casualty Company are the property of the three stockholders, under their control, and managed by one of the joint owners, Mrs. Helen Clayton. In the case of Montgomery v. Heath, supra [283 S.W. 327], the court said: "As the shareholders of the defunct corporation, they became the owners * * * in common of this property, subject, of course, to the claims of any creditors; and it does not appear that the company had any creditors." So, here, when W. M. McBride, Inc., was dissolved and its debts paid, the three stockholders became owners of the remaining property and were the owners as tenants in common, each owning his respective interest therein. The corporation becoming dead, the tenants in common had no insurable interest in the life of the insured. The judgment of the court below should be affirmed.