Moody v. Empire Life Ins. Co. of America

• Decision Date: 10 August 1978
• Docket Number: No. 5136,5136
• Citation: 570 S.W.2d 450
• Parties: Shearn MOODY, Jr., Appellant, v. EMPIRE LIFE INSURANCE COMPANY OF AMERICA et al., Appellees.
• Court: Texas Court of Appeals

Page 450

570 S.W.2d 450

Shearn MOODY, Jr., Appellant, v. EMPIRE LIFE INSURANCE COMPANY OF AMERICA et al., Appellees.

No. 5136.

Court of Civil Appeals of Texas, Eastland.

Aug. 10, 1978.

Rehearing Denied Sept. 21, 1978.

Ronald E. Holub, Newman, Shook & Newman, Dallas, Frederick J. Lawson, Galveston, for appellant.

Thomas M. Pollan, Asst. Atty. Gen., Shannon H. Ratliff, McGinnis, Lochridge & Kilgore, James R. Irion, III, State Board of Ins., Austin, for appellees.

McCLOUD, Chief Justice.

At issue in the trial court was the validity of an assignment of the right to receive a portion of the "death proceeds" payable under three "term" life insurance policies. The total amount payable under the policies upon death of the insured was $12,000,000. Shearn Moody, Jr., the insured, the Receiver of Empire Life Insurance Company of America, the owner and beneficiary of the policies, and Protective Life Insurance Company, the assignee of the death proceeds, each sought a declaratory judgment as to the assignee's "insurable interest" in the life of the insured. Empire State Life Insurance Company, National Western Life Insurance Company, and North America Life Insurance Company, were made parties based upon allegations they were either the insurer or reinsurer of the policies in question. The insured, Moody, contended the assignment was void because the assignee had no insurable interest in Moody's life. In a nonjury trial, based on stipulated facts, the trial court found, among other things, the assignee had an insurable interest and the assignment was valid. We will reverse and dismiss the cause. The insurable interest issue did not present a justiciable controversy.

Shearn Moody, Jr., was the principal stockholder, chief executive officer, president, and chairman of the board of directors of Empire Life Insurance Company of America, which was domiciled in the State of Alabama. In 1963, Moody assigned to Empire a portion of his life estate interest in a trust created by the will of Libbie Shearn Moody. The assigned interest was thereafter carried by Empire as an asset. $12,000,000 in term life insurance was taken out on Moody's life with Empire named in the policies as owner and beneficiary. The policies were acquired because the trust asset assigned to Empire by Moody was only an interest in income from the trust for the life of Shearn Moody, Jr., and would terminate on Moody's death. The trust interest could not be carried as an asset except to the extent that its value was covered by insurance on the life of Moody. On or about December 31, 1972, National Western Life Insurance Company became the insurer under the policies in question. In 1972, Empire was placed in receivership and the Insurance Commissioner of Alabama was appointed Receiver. Thereafter, Herbert Crook was appointed Ancillary Receiver of Empire in the State of Texas. Both the Alabama and Texas receivership courts authorized the Receiver to enter into a Treaty of Assumption and Bulk Reinsurance with Protective. Under the Treaty of Assumption the Receiver agreed to transfer to Protective 40% Of the life interest of Shearn Moody in 1/8th of the income from the Libbie Shearn Moody Trust. The Treaty, by amendment, provided that the Receiver would transfer "possession" of the insurance policies to Protective and assign to Protective the "right to receive death proceeds" from the policies in the amount of $4,350,000. The Treaty expressly stated that notwithstanding the transfer of possession of the policies to Protective, the Receiver would remain the owner and beneficiary of the policies. Included in the amendment was a provision for annual adjustment of the "assignment of proceeds of said policies . . . so that such assignment equals the then current value of the interest of Protective in the Libbie Shearn Moody Trust assigned hereunder . . ." The amendment further provided for the assignment of the policies and the naming of Protective as owner and beneficiary under certain conditions. On May 12, 1975, an Agreement to Effectuate the Treaty of Assumption and Bulk Reinsurance was entered into by the Receiver for Empire and Protective. The Alabama receivership court approved the agreement and notice of implementation was given to the Texas receivership court. On May 13, 1975, the Alabama Receiver executed an assignment of all of Empire's right, title and interest in and to all proceeds due to Empire on account of the insurance policies in question on the life of Moody. The assignment provided that after payment in full to Protective as provided in the Treaty, the remaining proceeds should be forthwith paid over to the Receiver. The Alabama receivership court has approved the assignment. The life estate interest in the Libbie Shearn Moody Trust has been assigned a value of $4,250,000 on the books of Protective.

It is only the assignment of the right to receive these "death proceeds" that is in issue in the instant appeal. Much related litigation, however, has occurred. See: Day v. State, 489 S.W.2d 368 (Tex.Civ.App. Austin 1973, writ ref'd n. r. e.); Empire Life Insurance Company of America v. State, 492 S.W.2d 366 (Tex.Civ.App. Austin 1973, no writ); Moody v. Jones, 519 S.W.2d 536 (Tex.Civ.App. Austin 1975, no writ); Moody v. State, 520 S.W.2d 452 (Tex.Civ.App. Austin), aff'd per curiam, 547 S.W.2d 958 (Tex.1977); Moody v. Crook, 520 S.W.2d 958 (Tex.Civ.App. Austin 1975, no writ); Moody v. Moody National Bank of Galveston, 522 S.W.2d 710 (Tex.Civ.App. Houston (14th Dist.) 1975, writ ref. n. r. e.); Moody v. State, 538 S.W.2d 158 (Tex.Civ.App. Waco 1976, writ ref. n. r. e.); Moody v. State of Texas, 539 S.W.2d 354 (Tex.Civ.App. Beaumont 1976, writ ref'd n. r. e.); and Moody v. State ex rel. Payne, 295 Ala. 299, 329 So.2d 73 (1976).

This is an appeal of a severed issue. The only matter before the trial court and the only issue before us on appeal is the issue of "insurable interest". This is clear from the trial court's severance order. In its judgment granting the relief sought by Herbert Crook, Ancillary Receiver of Empire Life Insurance Company and by Protective Life Insurance Company, the court declared:

"1. Herbert Crook, Ancillary Receiver of Empire Life Insurance Company of America, as statutory successor to Empire Life Insurance Company of America, has, and at all times pertinent to this suit had, a present insurable interest in the life of Shearn Moody, Jr., for the full amount of the life insurance policies on the life of Shearn Moody, Jr., in which Empire Life Insurance Company of America is the beneficiary, to-wit: Twelve Million Dollars ($12,000,000);

2. That the right to receive the proceeds from such policies upon the death of the insured is presently assignable by Herbert Crook, Ancillary Receiver, acting by and for the named beneficiary Empire Life Insurance Company of America, in an amount equal to Four Million Three Hundred Fifty Thousand Dollars ($4,350,000), and that he may assign additional amounts equal to any greater value assigned by the Alabama Insurance Department to the life estate heretofore transferred to Protective under the Treaty of Bulk Reinsurance, heretofore approved by this Court;

3. That Neither Empire State Life Insurance Company, National Western Life Insurance Company or North America Life Insurance, nor any of them, have any defense to payment of such policies based upon any claim of a lack of insurable interest in Protective Life Insurance Company of Birmingham, Alabama, from and after the assignment of proceeds as declared valid in the preceding paragraph;

4. That Protective Life Insurance Company has an insurable interest in the life of Shearn Moody, Jr., for so long as it has title to the life estate interest of Shearn Moody, Jr., transferred to it under the Treaty of Bulk Reinsurance, and that such present insurable interest is equal to Four Million Three Hundred Fifty Thousand Dollars ($4,350,000); and 5. That Protective Life Insurance Company's insurable interest declared above shall increase in the event the life estate interest of Shearn Moody, Jr., is revalued by the Alabama Insurance Department at a greater amount than Four Million Three Hundred Fifty Thousand Dollars ($4,350,000).

All other relief not expressly granted herein is denied."

The issue between the parties in the trial was whether Protective, the assignee of Empire, had an insurable interest in the life of Moody. The Empire Receiver and Protective argue that Protective has an insurable interest under the rule announced in Drane v. Jefferson Standard Life Ins. Co., 139 Tex. 101, 161 S.W.2d 1057 (1942), since Protective has "a reasonable expectation of pecuniary benefit or advantage from the continued life" of Moody. Moody argues the language relied upon by the Receiver and Protective is not applicable because as stated in Drane, the insurable interest under that...