Court Opinion

ID: 9857519
Source: CourtListenerOpinion
Date Created: 2023-09-24 14:53:24.746017+00
Date Added: 2024-06-11T09:43:43.581027
License: Public Domain

ROBERTSON, Justice,
dissenting.
I respectfully dissent. The summary judgment evidence in this case reveals that Kelly Associates, Ltd., was in its winding-up stages when its employee’s malfeasance was discovered. Control of the partnership’s business had been transferred to Fidelity, the acquiring company, two months prior to discovery. Kelly's insurance policy clearly stated that it covered losses sustained at any time but discovered during the policy period, and just as clearly provided that the policy would terminate upon Kelly’s being taken over by another business entity. Therefore, Kelly’s right to recover under the policy hinges on whether the September 25, 1981 transaction was a takeover.
As the majority recognizes, the common meaning of the word “takeover” focuses on continuity of management. First National Life Insurance Company v. Fidelity & Deposit Company, 525 F.2d 966, 969 (5th Cir.1976). Kelly’s stock brokerage business was placed entirely under the direction and control of Fidelity, leaving behind a skeletal legal entity whose only purpose was to disburse its remaining assets to the former partners. Despite this relinquishment of control, the majority holds that management was continuous, and that the partnership was not taken over.
The majority states that several indices of “doing business” existed after the acquisition by Fidelity on September 25, 1981. We do not find in the evidence any indication that Kelly continued to do business “as a broker-dealer in the securities business”, the purpose for which the partnership was formed.
After the sale of the business on September 25th, Kelly released all its employees, many of whom began work on Fidelity’s payroll. Some 30,000 customer accounts were transferred to Fidelity, less than 50 “problem accounts” were retained. General partner Lawrence Kelly stated in his deposition that the only task remaining to be done on behalf of the partnership was to complete the few remaining account transfers to Fidelity and distribute the remaining sale proceeds to the partners, 95% of which had already been distributed. In various communications the general partners referred to the transaction of September 25th as an “acquisition” of Kelly by Fidelity, and the “sale ... of all the assets and business of Kelly Associates, Ltd.” In its notice of discovery of loss sent to Aetna on December 17, 1981, Kelly stated that on September 25th it had “sold all its assets to Fidelity Brokerage Services, Inc.” The em*598ployment and noncompetition agreement which general partner Lawrence Kelly signed on September 25th recognizes that Fidelity “proposes to continue to engage in the business heretofore run by [Kelly].”
The fact that Kelly remained a member of the New York Stock Exchange and NASD for a brief period following the takeover is of no significance whatsoever: no business was done by the partnership under its memberships, and the memberships were quickly resigned. The retention of certain cash assets on Kelly’s ledgers after the takeover by Fidelity is also irrelevant. What matters is that the business of Kelly Associates, Ltd., was transferred to Fidelity and placed under its control.
The employee thefts for which Kelly seeks coverage occurred both before and after the September 25th takeover. However, Kelly only seeks recovery for thefts occurring before the takeover. Fidelity filed a claim with its insurer (Fireman’s Fund) for all post-takeover thefts, and recovered its losses. I consider this further evidence that the September 25th transaction was a takeover.
I agree that where terminology is in dispute, the accepted rules of insurance policy construction compel us to adopt the insured’s interpretation, so long as that construction is reasonable. Glover v. National Insurance Underwriters, 545 S.W.2d 755, 761 (Tex.1977). Kelly argues that takeover within the meaning of this policy means “complete takeover.” Kelly argues that under the facts of this case, the partnership would not be taken over until the partnership completely terminated. This construction is unreasonable. Partnerships are capable of change and reformation, including change in management, without termination.
In this case, the entirety of the partnership’s business has been transferred to another business entity, in a transaction which simultaneously placed the managing partners under the control of that entity and prevented the original partnership from continuing existence for any other purpose than to wind up its affairs and terminate. The termination clause at issue became effective upon the taking over of the insured, not upon its termination. I would affirm the judgments of the courts below finding that as a matter of law the sale on September 25, 1981, constituted a taking over of Kelly Associates, Ltd., by Fidelity within the meaning of the bond.
POPE, C.J., and SPEARS, J., join in this dissenting opinion.