617 F.2d 1201 (5th Cir. 1980), 78-2688, New York Life Ins. Co. v. Baum
|Citation:||617 F.2d 1201|
|Party Name:||NEW YORK LIFE INSURANCE CO., Plaintiff-Appellee, v. Noel B. BAUM, Defendant-Appellant, v. MEDIA SALES & MARKETING, INC., Defendant-Counterclaimant Cross-Plaintiff- Appellant.|
|Case Date:||May 30, 1980|
|Court:||United States Courts of Appeals, Court of Appeals for the Fifth Circuit|
Philip A. Staskus, John A. Bailey, Tara Wall, Debora D. Ratliff, Robin C. Gibbs, Houston, Tex., for Baum and Media Sales & Marketing.
Baker & Botts, Richard L. Josephson, Houston, Tex., for plaintiff-appellee.
Appeals from the United States District Court for the Southern District of Texas.
Before COLEMAN, Chief Judge, PECK [*] and KRAVITCH, Circuit Judges.
COLEMAN, Chief Judge.
The issue in this case is whether the District Court erred when, by summary judgment, it held that a $50,000 life insurance policy issued by the New York Life Insurance Company was null and void. The District Court found the policy to be void ab initio. We vacate and remand for further proceedings.
In early 1973, appellant Noel Baum and Bill Cook began discussing a joint business venture. Baum was then a Baton Rouge field underwriter for the New York Life Insurance Company. Cook was an advertising
sales manager at a Baton Rouge television station, with experience in the field of media advertising. Baum and Cook agreed upon a media advertising venture to be named Media Sales & Marketing, Inc. The original intention, as expressed by Baum in his deposition, was that the headquarters of the business was to be in Houston, Texas, but it was to be incorporated in Louisiana. 1 Cook was to furnish the experience for setting up and running the corporation and Baum was to furnish the starting capital. While in the process of setting up Media Sales, Carroll Cutler, a businessman in Houston, Texas, was added to the proposed corporate business venture. According to Baum, it was at this stage of planning that key man life insurance on the three came to be discussed and contemplated.
Baum's personal attorney drew up several drafts of a proposed pre-incorporation agreement, with plans for the business. The parties planned that Baum would contribute up to $45,000.00 for starting capital and helping the business arrange a line of credit. Under this plan, Baum intended to own and control the business during the early stages, with Cook and Cutler to buy back an interest when the business began generating income.
In late 1973, Cook moved to Houston, Texas, where he and Cutler opened an office and began doing business as Media Sales & Marketing, Inc. Baum helped to arrange a line of credit for the business at Bank of the Southwest in Houston. He personally extended considerable sums of money to Cook to use for developing the business. 2 By early November, 1973, however, Media Sales had not been formally incorporated and no operating income was being realized.
At this time, to protect his investment, Baum decided to go ahead with key man life insurance plans. His reciprocal insurance plan called for a policy on Cook with himself as beneficiary. On November 2, 1973, Baum executed an application for insurance on Cook's life, with a face amount of $50,000.00 plus accidental death benefits of $50,000.00. The application designated Media Sales & Marketing, Inc. as the policy owner and Noel Baum, Partner, as the beneficiary. Baum never filled out an application on his own life, with Cook as a beneficiary.
When it received Baum's application for insurance on Cook's life, New York Life (home office) notified Baum that company policy did not allow agents to be named as the...
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