Sinclair Refining Co. v. Long

• Decision Date: 17 May 1934
• Docket Number: 31447.
• Citation: 139 Kan. 632,32 P.2d 464
• Parties: SINCLAIR REFINING CO. v. LONG et al. [*]
• Court: Kansas Supreme Court

32 P.2d 464

139 Kan. 632

SINCLAIR REFINING CO. v. LONG et al. ^[*]

No. 31447.

Supreme Court of Kansas

May 17, 1934

Syllabus by the Court.

Corporation had insurable interest in life of its president and general manager, which insurable interest did not cease because insured's services with corporation ceased some months before his death.

Policies taken out by corporation on life of its president and general manager held not indemnifying contracts.

Policies taken out by corporation on life of its president and general manager held not wagering contracts, notwithstanding insured severed his connection with corporation before his death.

Policies which corporation took out on life of its president and general manager held not void as against public policy notwithstanding insured severed his connection with corporation before his death.

One cannot enter into contract with himself or with himself and others, though he acts in different capacities.

Officer of corporation cannot contract with corporation to his personal advantage and to its detriment.

Whether contract between officer of corporation and corporation is void or only voidable depends on nature of contract circumstances of its execution, and who acted for corporation in its execution.

Evidence held insufficient to establish contract whereby corporation obtaining policies on life of its president was to retain from proceeds of policies only amount of premiums it had paid with interest thereon with balance of proceeds being paid to president's estate if president's connection with corporation ceased before his death.

1. To stabilize its business, increase its financial standing, its borrowing power, its ability to sell stock, and its assets, a corporation took out policies of insurance on the life of the person who was its president and general manager, in which policies the corporation was named as sole beneficiary. Held (1) The corporation had an insurable interest in the life of the insured; (2) the policies were valid when issued; (3) and did not cease to be so because insured's services with the corporation ceased some months before his death. Further held: Such policies are not indemnifying contracts; neither are they wagering contracts; neither are they void as being against public policy.

2. There must be at least two parties to a contract. It is not possible for an individual simply by his own mental operations to enter into a contract with himself, or with himself and others, even though he acts in different capacities.

3. An officer of a corporation owes to it such allegiance that he cannot contract with it to his personal advantage and to its detriment. Contracts between such officers and the corporation are subject to the keenest scrutiny. Whether they are void, or voidable only, depends upon the nature of the contract, the circumstances of its execution, and who acted for the corporation in its making. Such an officer cannot be heard to say that he alone made a contract with the corporation of which he was president and general manager and which inured to his benefit and to the detriment of the corporation.

4. In an action in which such benefits were claimed by the personal representatives of such an officer, the record is examined and it is held, such claims are not sustained either by the pleadings or the proof.

Appeal from District Court, Riley County; Edgar C. Bennett, Judge.

Actions by the Long Oil Company against the Northwestern Mutual Life Insurance Company, against the Penn Mutual Life Insurance Company, and against the Aetna Life Insurance Company, wherein Laura E. Long and another, as executrices of the estate, last will, and testament of A. W. Long, deceased, were substituted as defendants in each case, and wherein the Sinclair Refining Company was substituted as plaintiff in each case. The defendants Laura E. Long and another, as executrices of the will of A. W. Long, deceased, filed cross-petition, and from an adverse judgment, they appeal.

William Ritchie, of Omaha, Neb., Ira C. Snyder, of Manhattan, A. E. Crane and A. Harry Crane, both of Topeka, and C. Vincent Jones and W. T. Roche, both of Clay Center, for appellants.

Walter E. Brown and Roger B. Jones, both of Kansas City, Mo., and R. P. Evans, George Clammer, Hal E. Harlan, and A. M. Johnston, all of Manhattan, for appellee.

HARVEY Justice.

This appeal presents a controversy between rival claimants to the proceeds of four life insurance policies, of the aggregate face value of $100,000, issued by three life insurance companies on the life of A. W. Long, in which the Long Oil Company, a corporation, was named beneficiary. The insured died February 19, 1932. His widow, Laura E. Long, and his daughter, Ruth L. Dary, executrices of his will and beneficiaries named therein, promptly notified the insurance companies that they claimed the proceeds of the policies. The Long Oil Company sued on the policies, bringing three actions, one against each of the insurance companies. Proceeding under our statute (R. S. 60--418), the insurance companies filed affidavits in which they admitted liability on the policies and asked to be permitted to pay the money into court; they stated the insured's executrices were claiming the proceeds, and asked that they be made parties to the action and substituted as defendants. These requests were granted.

The net proceeds of the policies, $83,496.05, being their face value less the amount of loans previously made to the Long Oil Company thereon, was paid into court, where it has been properly impounded pending the outcome of the action. Thereafter the Sinclair Refining Company, having purchased the assets and assumed the liabilities of the Long Oil Company, was substituted as plaintiff in each case. The defendants Laura E. Long and Ruth L. Dary, as executrices of the will of A. W. Long, by answer and cross-petition, set up their claims to the proceeds of the policies, which claims, shortly stated, are: (1) That the Long Oil Company had no insurable interest in the life of A. W. Long, and for that reason is not entitled to the proceeds of the policies; and (2) that under an oral agreement between the insured and the Long Oil Company the executrices were entitled to the proceeds of the policies, less premiums paid by the Long Oil Company with interest thereon, notwithstanding the fact that the Long Oil Company was named in the policies as the sole beneficiary. Issues were properly joined, and by stipulation the three actions were consolidated and tried as one. The defendants voluntarily assumed the burden of proof, and at the close of their evidence the court sustained plaintiff's demurrer thereto and rendered judgment for plaintiff. Defendants' motion for a new trial was overruled, and they have appealed.

The facts may be stated as follows: In 1914 A. W. Long began the operation of an oil station at Manhattan. The business appears to have prospered for a time. He acquired and operated three or four other stations, and in 1917 incorporated the business in the name of the Long Oil Company, with a capital stock of $25,000, "to engage in the mercantile business, buying and selling oil, gasoline, auto accessories and other articles of merchandise in connection therewith." The capital stock was increased to $50,000 in 1919, and $100,000 preferred stock was added to the capital in 1920. In 1926, on an appraisal of the corporation's assets, a 400 percent. stock dividend was declared and the capital stock was increased to $250,000 common and $200,000 preferred. In December, 1926, the preferred stock was increased to $450,000, and in April, 1930, to $650,000, and the company then owned and operated more than seventy-five oil stations, but was borrowing substantial sums. Upon the increases of the capital stock in 1926, and subsequently, extensive stock-selling campaigns were inaugurated and carried on, to direct which a man capable and experienced in that business was employed. On February 20, 1931, its board of directors authorized and directed its officers to take such action as may be necessary "to secure the release and discharge of any of its property and assets, including life insurance policies, heretofore pledged in any manner as security on any outstanding note or account," and further authorized and directed its president and secretary, on behalf of the company, to execute and deliver to L. R. Crawford, trustee, a promissory note for $200,000, due in six months, bearing interest at 6 percent. per annum, all in pursuance of a contract of February 4, 1931, between the company and said trustee. The bills payable and accounts then due and listed amounted to $172,960.46, which list did not include sums borrowed on the life insurance policies. A. W. Long owned the majority of the common stock of the company, was its president and general manager from the organization of the corporation until in March, 1931, when the lost control of it, and ceased to be an officer or employee of the company on May 31, 1931. It was essentially a one-man company. All the years he was president and general manager of the company A. W. Long directed, controlled, and in a sense dominated its business activities, with members of his family, other relatives, employees, or personal friends, being on the board of directors, which board appears not to have met often.

The provisions of the four policies sued upon and their history so far as here pertinent, is as follows: Policy No. 1355307, in corporate form, for $20,000, issued by the Northwestern Mutual Life Insurance Company upon the life of A. W. Long, was dated November 21, 1927. The beneficiary named therein was "The Long Oil Company, the beneficiary, its successors or assigns; a corporation organized under the...