Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-15-03446/USCOURTS-ca7-15-03446-0/pdf.json

Parties Involved:
Samaron Corp.
Appellant
United of Omaha Life Insurance Company
Appellee

Document Text:

In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 15-3446

SAMARON CORP., doing business as Troyer Products,

Plaintiff-Appellant,

v.

UNITED OF OMAHA LIFE INSURANCE COMPANY,

Defendant-Appellee.

____________________

Appeal from the United States District Court for the

Northern District of Indiana, South Bend Division.

No. 3:12-CV-397 — Rudy Lozano, Judge.

____________________

ARGUED APRIL 1, 2016 — DECIDED MAY 17, 2016

____________________

Before POSNER, EASTERBROOK, and WILLIAMS, Circuit 

Judges.

EASTERBROOK, Circuit Judge. In 2003 Troyer Products 

(formally Samaron Corp.), a closely held corporation, purchased a policy of insurance on the life of Ron Clark, then its 

President. Dave Buck, its COO, was the beneficiary. Clark, 

who approved the transaction, thought that the death benefit 

of $1 million would enable Buck to buy out his stock, so that 

the money would end up in the hands of Clark’s family

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while Buck would come to control the company. United of 

Omaha Life Insurance Company initially wrote the policy 

that way, but it was soon amended so that the death benefit 

would go to Troyer. (One side says that United’s underwriting department insisted on this change, the other that tax 

considerations dominated; the reason does not matter now.) 

Troyer did not undertake by contract to turn the death benefit over to Buck, but both Buck and Ron Clark’s wife Darlene

recall that this was the plan.

In 2005 Clark retired and sold a controlling interest to 

Dan Holtz, who became the firm’s new President. Buck remained as COO. After this transaction Holtz owned 61% of 

the stock and Buck the rest. As part of his purchase, Holtz 

received a copy of the policy, including the amendment 

naming Troyer as the beneficiary. Another copy was in 

Troyer’s files. Clark died in November 2011. Buck told Holtz

that Troyer was the beneficiary, but when Holtz called United he was told that the money would be paid to Buck—and 

it was. When Buck tried to use the proceeds to buy Holtz’s 

stock, he was removed from the board and soon quit as

COO. Troyer filed this suit under the diversity jurisdiction,

contending that the benefits should have been paid to it. 

United, not wanting to pay $2 million on a $1 million policy, 

has resisted despite conceding that Troyer was indeed the 

policy’s beneficiary.

What had gone wrong came out during discovery. United makes electronic copies of its policies. Once policies have 

been issued, its staff normally works from the electronic file. 

Each document receives a code, making it easier for the staff 

to know what to look for. As we have mentioned, the first 

version of the policy named Buck as the beneficiary, but that 

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No. 15-3446 3

was changed by amendment. Whoever added the amendment to the electronic file misclassified it as a “Post-Issue 

Requirement” rather than as a change of beneficiary. When 

Holtz called after Clark’s death, one of United’s employees 

looked at the electronic copy of the policy, saw Buck as the 

beneficiary, and looked for the code denoting an amendment 

changing the beneficiary. Not finding one, he told Holtz that 

the death benefit would be paid to Buck. In discovery, this 

employee testified that it had not occurred to him to look at 

a document tagged as a “Post-Issue Requirement.” But 

someone eventually went through the whole file and found 

the amendment, which led to this suit.

United acknowledges its error in paying Buck. But it 

does not acknowledge liability. It maintains that Troyer 

knew the truth and allowed Buck to claim the money, carrying out the plan that Clark and Buck had devised in 2003. 

United observes that Troyer’s corporate files contain a copy 

of the amendment, and Holtz’s personal files contain another. It’s their own fault for not looking, United maintains. 

And United adds that, at a meeting of Troyer’s board soon 

after Clark’s death, the company chose to allow Buck to receive the death benefit. After naming new members to the 

board, however, Holtz caused it to adopt new minutes reciting that no such decision had been made.

Believing the recording of the meeting to have been lost, 

the district court denied United’s motion for summary 

judgment and set the case for trial. 2014 U.S. Dist. LEXIS

137656 (N.D. Ind. Sept. 29, 2014). Shortly after the court issued this opinion, however, Troyer admitted that it had 

found the recording a month earlier and turned it over to 

United’s lawyers. The judge listened to the recording and 

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found it dispositive. At the meeting Buck repeatedly told 

Holtz that Troyer was the policy’s beneficiary, yet with this 

knowledge the board unanimously opted to allow Buck to 

receive the money. The judge found that the minutes of this 

meeting had been falsified by Holtz’s new appointees and 

that Holtz’s fervent denial that he knew the policy’s true 

beneficiary is conclusively refuted by the recording. The 

judge granted United’s motion to reconsider and entered 

summary judgment in its favor.

Troyer’s appellate brief insists that Holtz was misled by 

United’s error and had no reason to think that Troyer was 

the policy’s beneficiary. We agree with the district court that 

this proposition is untenable in light of the statements Buck 

made at the board meeting. Buck told Holtz to his face that 

Troyer was the policy’s beneficiary. He even pulled out a 

copy of the policy: “Um, beneficiary is on page 8. [Flipping 

through papers.] Um, let me oh, right here. [Reading] ‘This 

policy is issued with the owner and primary beneficiary as

Troyer Products, employer.’”

And if that were not enough, Troyer’s files contained a 

copy, as did Holtz’s personal files. Let us suppose, as Holtz 

asserts, that he refused to believe what Buck was saying and 

thought it unnecessary to look at the policy, in light of what 

United’s staff had said. Still Troyer (the corporation) knew 

the truth, because its principal officers in 2003 (Clark and 

Buck) had negotiated the policy and were well aware of its 

contents. What the President and COO knew, Troyer knew. 

There is no such thing as corporate amnesia. Prime Eagle 

Group Ltd. v. Steel Dynamics, Inc., 614 F.3d 375 (7th Cir. 2010). 

Turnover in a corporation’s management does not wipe out 

the corporation’s fund of knowledge. That Holtz did not 

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No. 15-3446 5

know something does not mean that Troyer the corporation 

was ignorant.

The fact remains that United paid the death benefit to the 

wrong party. United contends that Troyer waived its right to 

the money, and the district judge agreed. There are at least 

two potential ways to contest that conclusion—and Troyer 

does not pursue either of them.

The first would be to emphasize that, although the board 

discussed the issue, it did not adopt a resolution. In Indiana, 

whose law controls this litigation, boards act by majority 

vote. Ind. Code §23-1-34-5(c) (vote at meeting); cf. Ind. Code 

§23-1-34-2 (decision without a meeting based on written 

consent of all directors). Apparently Troyer conducted business informally; it operated by consensus (at least until 

Holtz used his 61% interest to get rid of Buck). The district 

judge wrote that Indiana allows corporate boards to make 

binding decisions by consensus, without voting on resolutions. The judge did not cite anything for this proposition, 

and our own search did not turn anything up. But Troyer 

does not contest this aspect of the district court’s analysis. 

Pages 27–28 of Troyer’s brief mention in passing that the 

board did not adopt a resolution waiving the firm’s right to 

the money, but the brief does not contain any legal argument 

about the subject. Any potential challenge to this aspect of 

the district court’s disposition has been forfeited.

The second way would start with the observation that 

the board did not choose between allowing the money to go 

directly to Buck and having it paid to the firm and then 

passed on to Buck (provided that it stayed off the books and 

did not cause heartburn for the firm’s accountant). But Troyer does not make anything of this either. It does not contend 

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that direct payment to Buck had adverse tax consequences 

for the firm. Nor has a tax collector or creditor appeared to 

argue that, had the money passed through the firm’s coffers, 

it would have had first dibs. So the board’s failure to decide 

exactly how the money would end up in Buck’s hands does 

not matter.

From beginning to end, Troyer’s brief rests on the assertions that Holtz was misled by United and did not know that 

Troyer was the policy’s beneficiary. That approach commits 

the legal error of confusing Holtz with Troyer; the corporation’s knowledge, not Holtz’s, is what matters. And it commits the factual error of ignoring what happened at the 

board meeting, where Buck made sure that everyone present 

knew that Troyer was legally entitled to the proceeds. If this 

left Troyer the corporation, or Holtz personally, in a state of 

confusion, either could have had a lawyer investigate and 

clear things up. Instead the board elected to let the money go 

to Buck, and we have explained why the route it took to get 

there does not matter.

AFFIRMED

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