Coleman v. Northwestern Mutual Life Insurance Company

• Decision Date: 04 March 1918
• Citation: 201 S.W. 544,273 Mo. 620
• Parties: FRANK B. COLEMAN, Trustee of Estate of GEORGE D. ALLEN PAPER COMPANY, Appellant, v. NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY
• Court: Missouri Supreme Court

201 S.W. 544

273 Mo. 620

FRANK B. COLEMAN, Trustee of Estate of GEORGE D. ALLEN PAPER COMPANY, Appellant, v. NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY

Supreme Court of Missouri, First Division

March 4, 1918

Appeal from St. Louis City Circuit Court.-- Hon. Daniel D. Fisher Judge.

Reversed and remanded.

Grant & Grant and Leahy, Saunders & Barth for appellant.

(1) The beneficiary in a life insurance policy has a vested interest when the insured does not reserve the right to change the beneficiary, and this is particularly true when the policy provides: "It is agreed that the insured has no interest in this policy, the beneficiary being the sole owner thereof."Both these facts were true in the instant case, and the policy was payable to the George D. Allen Paper Company, and all premiums were paid by it.Therefore, it could not be assigned without the consent of the company, or even with its consent, in fraud of its creditors, and the attempted substitution of a new policy just prior to the insured's death, making his wife the beneficiary was null and void and in fraud of the creditors of the company.(a) Where the beneficiary has a vested interest in a life insurance policy, it cannot be assigned or changed without his consent.Casualty Co. v. Kacer,169 Mo. 313;Bank v. Hume,128 U.S. 209;3 Am. & Eng. Ency.Law (2 Ed.), 923.(b) An insurance policy cannot be assigned in fraud of the insured's creditors or, in fraud of the creditors of the beneficiary, where such beneficiary has a vested right.Pullis v. Robison,73 Mo. 210;Bank v. Ins. Co.,24 F. 769;Bank v. Life Ins Co.,24 F. 770;Burton v. Farinholt,86 N.C. 260;Catchings v. Manlove,39 Miss. 655;Friedman v. Fennell,94 Ala. 570;McKown's Estate, 198 Pa. 96;Bank v. McLean,84 Mich. 628;Bank v. Moore,83 App.Div.(N.Y.) 419;Stokoe v. Cowan,21 Beav. 640;Schondler v. Wace, 1 Campbell 487.(c) Business insurance taken out on the life of an officer of the corporation for the benefit of the corporation is an asset of the corporation."It is not a mere contract of indemnity, but a contract to pay to the beneficiary a certain sum of money in the event of death."Insurance Co. v. Board, Armstrong & Co., L.R.A.1915 F, p. 979;Keckley v. Glass Co.,86 Ohio St. 2113.(d) Gifts by a husband of his own property, while insolvent, to a wife are by operation of law void as to creditors and constructively fraudulent.Storage Co. v. Kuhlmann,238 Mo. 698;Jordan v. Buschmeyer,97 Mo. 94;Cole v. Cole,231 Mo.In the instant case, the husband did not give his own property, but gave the most valuable asset of the corporation to his wife without consideration, and in fraud of the company's creditors.(e) Even assuming, which we deny, that both the Insurance Company and the creditors are equally innocent in this matter, still the Insurance Company, knowing the terms of its own policy, and knowing that it was a corporate asset of large value, could, by investigation, have protected both itself and the creditors of the company, and it was under no obligation to substitute another policy in favor of the wife of the president of the company, and thereby deprive the company of a valuable asset.Having done so, it must bear the consequences, and the equities of the creditors in this situation are far stronger than the claim of the company for protection from its own mistake.Rice v. Graffman,56 Mo. 436;Bank v. Bank,71 Mo. 185;State v. Bank,115 N.W. 937;Bank v. O'Connel,23 Mo.App. 165;Wade v. Bank,73 App. 501;Cupples v. Whelan,61 Mo. 587.(f) Even if the Insurance Company could not have ascertained by a mere examination of the company's books that the company was insolvent at the time of the attemped transfer of the policy, still such transfer under the statute was null and void as to creditors, because in fraud of their rights.No matter how innocent a person may be, still he cannot be a party to a transfer, without consideration, of the assets of an insolvent person in fraud of the rights of creditors.If ignorance or innocence were a defense, it is safe to say that the statute prohibiting fraudulent conveyances, would be meaningless.Sec. 2881, R. S. 1909;Hurley v. Taylor,78 Mo. 239;Childers v. Pickenpaugh,219 Mo. 448;Bank v. Nichols,202 Mo. 323.(2) The board of directors never authorized Allen to execute the release to Rhoda Allen and the surrender of the policy to the defendant company.While the president of a business corporation is its chief executive officer, yet his powers are those connected with acts of an ordinary nature which, by usage or necessity, are incident to his office.He may bind the corporation only by contracts in matters arising in the usual course of business.Sparks v. Transfer Co.,104 Mo. 531.Even if it had been shown that the three directors had severally assented to Allen signing the surrender, it would not have been a valid act of the board of directors.Brinkerhoff v. Boyd,192 Mo. 613;Hill v. Mining Co.,119 Mo. 9.(3) Where an agent of a corporation exercises his authority in favor of himself, or as in this case, in favor of his wife, his act is presumptively void and the burden is on the recipient to overcome the presumption.The primary question in such case is not whether the officer had power to do an act of that character, but did the agent have authority to execute in the name of the corporation the instrument in question.The burden is on the other person to show authority.Bank v. Edwards,243 Mo. 553;Baird v. Grannis,208 Mo. 434;Safety Vault Co. v. Boynton,19 C.C.A. 118, Rankin v. Inv. Co.,238 Mo. 406;Botts v. Wallace,146 U.S. 689;Bank v. Inv. Co.,163 Mo.App. 369.(4) Transfers by a husband in favor of a wife, even of his own property, if he is insolvent, are by operation of law void as to creditors and constructively fraudulent.Ice Co. v. Kuhlmann,238 Mo. 698;Jordan v. Buschmeyer,97 Mo. 94;Cole v. Cole,231 Mo. 1;Johrndt v. Reuter H. & S. Co.,112 Mo.App. 341;Pressed Brick Co. v. Schnoenich, 65 Mo.App. 283.

Nagel & Kirby for respondent.

(1) The surrender of the original policy by the Paper Company was its corporate act, because: (a) It was duly executed by the president of the company with the corporate seal affixed, attested by the secretary.A corporation which delivers a contract purporting on its face to be lawfully executed, in reliance upon which the parties change their situation without notice of defects in preliminary proceedings, is estopped as against them from denying its validity.Zabriskie v. Railroad,23 How. 381;Terminal R. & W. Co. v. Trust Co.,82 F. 124;Platt v. Hitchcock County,139 F. 929;Aurora v. Gates,208 F. 101.(b)The Paper Company was a "one-man" corporation, and Allen, having been held out to the world as being the corporation, his act in executing the surrender was the act of the corporation.Cutter Co. v. Meyer,64 Mo.App. 527;Mfg. Co. v. Clarke,96 Wis. 469;Tyler Estate v. Hoffman,146 Mo.App. 510;Moore v. Gaus Company,113 Mo. 98;Rosenbaum v. Gilliam,101 Mo.App. 126;Sparks v. Transfer Co.,104 Mo. 531;Jones v. Williams,139 Mo. 1;Madden v. Paroneri Co.,75 Mo.App. 358;Commercial Hotel v. Brill,123 Wis. 638.(c) The surrender of the policy was consented to by all the stockholders, and was ratified by the board of directors of the Paper Company by its failure to disaffirm the same at meetings held after Rhoda Allen had become a member of the board, and when every member of the board had actual knowledge of the transaction.Bank v. Shoemaker,68 Mo.App. 592;Kelsey v. Bank,69 Pa. 426;Thompson on Corporations, sec. 2015;3 Morawetz, sec. 228;Gordon v. Preston, 1 Watts, 385;Chouteau v. Allen,70 Mo. 325;Bank v. Fricke,75 Mo. 178.(2) Whether solvent or insolvent, the Paper Company had the power to consent to the surrender, and the title to the policy passed, such surrender being voidable only to the extent that creditors may have had a right to impeach it.(3) The original policy, having no surrender value and being worthless, was not an asset of the corporation of which creditors were defrauded, even if it be assumed that the Paper Company was insolvent at the time of the surrender.Barbour v. Ins. Co.,23 A. 151(Con.);Steeley v. Steeley,64 S.W. 642;Ins. Co. v. Ins. Co.,203 Pa. 82;Mittelburg v. Harrison,11 Mo.App. 136, 90 Mo. 444;Judson v. Walker,155 Mo. 166;Sternberg v. Levy,159 Mo. 617;20 Cyc. 350, 416.(4) Under the Bankruptcy Acta trustee has no right whatsoever to a policy which has no cash surrender value, and where the policy has a cash surrender value at the time of the filing of the petition in bankruptcy, the trustee can claim no more than such cash surrender value, although the entire proceeds became available before adjudication.Burlingham v. Crouse,228 U.S. 459;In re Buelow,98 F. 86;Morris v. Dodd, 50 L.R.A. 33.

BLAIRJ. Bond, P. J., absent.

OPINION

BLAIR, J.

Coleman is trustee in bankruptcy of the estate of the George D. Allen Paper Company.

This is an appeal from an order overruling a motion to set aside a nonsuit taken when the trial court instructed for defendant in an action on a policy of insurance on the life of George D. Allen, president of the George D. Allen Paper Company, which company was the beneficiary in the policy as first issued.The question is whether the evidence required a submission of the case to the jury.

I.The policy expressly provided that Allen reserved no right to change the beneficiary.Under the general rule that fact vested in the beneficiary an interest of which it could not be deprived without its consent.

There is no direct evidence that the board of directors of the Paper Company had formally authorized any change in the policy or that they had so conferred an agency upon the corporate...