Clayton v. Southwestern Life Ins. Co.

LOONEY, Justice. This suit arose over a controversy in regard to a proper distribution of the proceeds of two life policies, aggregating $25,-000, issued by the Southwestern Life Insurance Company on the life of Martin McBride, in which W. M. McBride, Inc., was named beneficiary. The material facts are undisputed and are, as follows: W. M. McBride, Inc., was chartered under the laws of the State of Texas in December, 1926, for the purpose of conducting a general retail mercantile business at Green-ville, Hunt County, Texas, and at other places. Its stock was owned as follows: Martin McBride, the managerial head of the corporation, owned 56% and his two sisters, Helen Clayton and Linna Mae McNeil, each owned 22% thereof. On March 6, 1932, the policies in question were issued ; premiums thereon for the years 1932, ’33, ’34 and ’35 were paid by the corporation. During 1935, the insured becoming permanently disabled within the meaning of the policies, payment of premiums to accrue in the future was waived. Prior to 1937, the business of the corporation had been reduced to the one store conducted in the City of Greenville, which, during that year, was totally destroyed by fire; and Martin McBride, as its sole active director, continued to manage and control its affairs; collected the insurance covering the fire losses and, after paying all debts due by the corporation, distributed among its stockholders the remaining proceeds of the fire loss; after which, the corporation, by unanimous .consent of the stockholders, went into voluntary dissolution, the certificate for that purpose being filed with the Secretary of State on December 15, 1937. Thereafter, on April 6, 1938, the insured, without the knowledge' or consent of the other stockholders, changed the named beneficiary (the corporation), naming his wife, Rose Agnes McBride, and his two sons, Martin McBride, Jr., and Warren McBride, beneficiaries. After the distribution of the proceeds arising from the fire loss, there remained, undisposed of, the following properties belonging to the corporation, that is, a brick business house in the City of Greenville, rented for mercantile purposes (neither its value nor the amount of rent it yields is stated); also sixteen shares of stock in the Employers’ Casualty Company, of the par value of $10 per share (its actual value is not stated) ; and had an account with the Greenville National Exchange Bank, which was continued to the time of the death of the insured (its status not being disclosed) ; these properties and affairs continued under the management and control of Martin McBride, the insured, to the time of his death, which occurred on December 6, 1939 (a few days less than two years after the certificate of dissolution was filed with the Secretary of State). At the time the policies were taken out, the insured, Martin McBride, was an active and apparently successful business man, of large experience, well educated, well and favorably known, and, for a number of years, had managed the affairs of the mercantile business, and the insurance on his life was taken out originally for the sole benefit of the corporation. The controversy having arisen in regard to the distribution of the proceeds of the two policies, this suit was instituted by Martin McBride, Jr., individually and as administrator of the estate of his deceased father, and Rose Agnes McBride, individually and as guardian of the estate of Warren McBride, a minor son of herself and her deceased -husband, against Southwestern Life Insurance Company, Helen Clayton and her husband, Linna Mae McNeil and her husband; seeking judgment for the proceeds of the policies, and that the Clay-tons and McNeils be denied recovery of any portion thereof, -except, it was admitted that, as stockholders, they were entitled to be reimbursed to the extent of their proportionate part (22% each) of the premiums on the policies, paid by the corporation. For reasons appearing later, the "Claytons and McNeils each claimed 22% of the proceeds of the policies, being the percentage of stock each owned in the corporation. The record discloses that the Southwestern Life Insurance Company, at all times, has been willing,, ready, and able to pay the proceeds of the policies to the person or persons entitled to receive same, but was unable, with safety to itself, to determine to whom to make payment, owing to the conflicting and rival claims; therefore, filed an interpleader, requesting permission to pay the proceeds of the policies into the registry of court, and that it be discharged with an allowance of an attorney’s fee; all of which was granted by the court, the money paid into .its registry, an attorney’s fee of $250 was allowed, and the insurance *822 company was fully and finally acquitted and discharged from all liability. The judgment disposing of the case as to the insurance company was not excepted to by either party, hence it will be affirmed, and the company’s connection with the case will receive no further notice. On hearing as to the other parties, the court rendered judgment to the effect that, appellees recover the entire proceeds of the two policies, save and except 44% of the amount of the premiums upon the policies, paid by the corporation, which was awarded to the Claytons and McNeils, same being in proportion to the amount of stock in the corporation owned by them; it was further adjudged that they pay all costs of court; to all of which they excepted, gave notice of and perfected this appeal. Appellees admit in their brief (pages 2 and 3) that they are not entitled to the proceeds of the policies by virtue of the change of beneficiary; their contention being that, the corporation having been dissolved, the stockholders thereafter had no insurable interest in the life of'Martin McBride, hence his estate was entitled to recover the proceeds of the policies. In view of this admission, appellants contend that the sole question for determination is, whether or not the corporation, being in process of liquidation at the time of the death of Martin McBride, was a legal beneficiary; if so, as stockholders, they are entitled to participate in the distribution of the proceeds of the policies, in proportion to the stock in the- corporation owned by them; that is to say, 44% or 22% each. Thus, the inquiry is reduced to the question, whether . or not the corporation existed as a legal entity at the death of the insured and had an insurable interest in his life. The statute (Art. 1387, subd. 4) provides for the voluntary dissolution of a corporation by the written consent of all stockholders, certified to and filed with the Secretary of State; and, in such case (Art. 1388), provides that the president, directors or managers of the affairs of the corporation, at the time of the dissolution, shall be trustees of the creditors and stockholders, “with power to settle the affairs, collect the outstanding debts,' and divide the moneys and other property among the stockholders after paying the debts due and owing by such corporation at the time of its dissolution * * * and for this purpose they may in the name of such corporation, sell, convey and transfer all real and personal property belonging to such company, collect all debts, compromise controversies, maintain or defend judicial proceedings, and exercise full power and authority of said company over such assets and property.”; it being also provided (Art 1389) that “The existence of every corporation may be continued for three years after its dissolution from whatever cause, for the purpose of enabling those charged with the duty, to settle up its affairs. * * *” Construing the several provisions of the statute on the subject of dissolution, we think it obvious that, where a receiver is not appointed, a corporation exists as a legal entity for three years from the filing of the certificate of dissolution with the Secretary of State, unless its affairs are sooner settled, debts paid, and money or other property, if any on hand, divided among the stockholders. Until the three years elapse, or the affairs of the corporation are fully settled, it has a limited or de facto existence for winding-up purposes. Construing these statutes, the Amarillo Court of Civil Appeals, in Waggoner v. Edwards, 68 S.W.2d 655, 659, speaking through Chief Justice Hall, said: “It was clearly the intention of the Legislature in enacting these statutes to change the rule of law as it previously existed under which a dissolved corporation could not be sued, and the effect of the statutes cited is to maintain the status quo and continue the existence of the corporation as a legal entity for the purpose, however, of distributing its assets first amongst the creditors and the residue, if -any, amongst the stockholders, and it is expressly authorized to sue and be sued upon any claim against it.” Construing a similar statute, the Supreme Court of South Carolina, in Henry Mercantile Co. v. Georgetown & W. R. Co., 104 S.C. 478, 89 S.E. 480, 481, said: “The statute provides the manner in which the corporation may be dissolved, but it does not contemplate a dissolution until the affairs of the corporation have been liquidated.” In First National Bank v. United States, D.C., 9 F.Supp. 28, 29, the court said: “The statutes of Wyoming, supra, like those of many other states, provide that the corporation may have a limited existence for some purposes, even -after a dissolution, and it is the law * * * that a corporation may have a de facto existence for certain purposes after dissolution.” And in 14A C.J. 1151, § 3804, it is stated that-: “Statutory continuance for some pur *823 poses after dissolution or forfeiture of charter is very generally provided for, so that, while destroying the corporation’s power to continue its business under the charter, a dissolution may not have the effect of dissolving the corporation for absolutely all purposes, and the corporation may continue to have a limited existence during the statutory period of continuance. Under the right to continue its business for winding-up purposes the corporation has authority to do whatever is necessary as an incident to such winding up.” 19 C.J.S., Corporations, § 1728. The case of Brammer v. Wilder, 122 Tex. 247, 57 S.W.2d 571, involved the distribution of the proceeds of a policy of insurance'on the life of a member of a partnership, the pivotal question being whether or not the partnership had been dissolved; its status on the facts being very similar to that of the instant case, in that, there had been a partial liquidation of the affairs of the partnership, with reference to which, the court, in an opinion by Judge Critz (quoting from the Syl.) held that: “Notice of partnership’s dissolution and transfer of portion of assets to corporation did not dissolve partnership where partnership retained assets and conducted business, until partner’s death.” So, it appearing that, at the death of Martin McBride, (less than three years from the filing of the certificate of dissolution with the Secretary of State), the affairs of the corporation not having previously been fully settled, as it then owned a brick business house in the City of Greenville, rented to and occupied by a merchant, owned sixteen shares of stock in a corporation, and maintained a current account with the bank with which it had. conducted its business for several years, we do not think it had ceased to exist as a legal entity, had not been dissolved for all purposes, but was invested with a limited or de facto existence, to the end that its affairs might be fully and finally settled. The interest of W. M. McBride, Inc., in the life of Martin McBride, was based upon his experience and managerial ability as a merchant; the policies being intended as an indemity against loss or damage the corporation would suffer by being deprived of •his services, in the event of his death. This character of insurance was prohibited in this State as being against public policy, until the enactment of Art. 5048, R.C.S., see Brammer v. Wilder, 122 Tex. 247, 57 S.W.2d 571. The provisions of that Article, in so far as pertinent here, are that, “Any corporation * * * may be named beneficiary in any policy of insurance issued by a legal reserve life insurance company on the life of any officer or stockholder of said corporation * * *. The beneficiaries aforenamed shall have an insurable interest for the full face of the policy and' shall be entitled to collect same. * * *” We • think it follows, inescapably, that, as long as the corporation in process of liquidation has a legal existence for any purpose, although limited or de facto, and owns assets and has unsettled affairs, as in the instant case, whether great or small, requiring the services of the insured officer or stockholder, the insurable interest persists, and the corporation, as expressly provided by statute, is entitled to collect the full face of the policy; and when collected, the fund has the status of, and is subject to be dealt with as any other asset of the corporation. So we conclude that, at the death of Martin McBride, the insured W. M. McBride, Inc., being invested with a limited or de facto corporate existence for winding-up purposes, owning, at that time, unliq-uidated assets and having unsettled business affairs that, up to the death of the insured, were under his management and control, the proceeds of the policies, being assets of the now defunct corporation, belong to the stockholders; hence, appellants are entitled to their proportionate interest in this fund; that is,'44% of the whole, each appellant owning 22% thereof. The judgment below is accordingly reformed in harmony with the views herein expressed and, as reformed, is affirmed. All costs of this appeal, as well as the costs below, will be taxed against and paid by the appel-lees. Affirmed in part, and in part reformed and affirmed. BOND, C. J., dissents.