Court Opinion

ID: 9643822
Source: CourtListenerOpinion
Date Created: 2023-08-22 20:41:06.126094+00
Date Added: 2024-06-11T18:11:03.801091
License: Public Domain

BUFFINGTON, Circuit Judge
(dissenting).
This case turns on the construction and effect of the written agreement signed by the corporation, the stockholder, Charles E. Golden (the insured) and the trustee. When the agreement was entered into and at all times thereafter the corporation had on hand ample surplus to pay, and it. continued to pay, all premiums thereon. It will be noted that while in form the payments were made by the corporation, yet in reality the money thus paid was the property of the stockholders and to this extent said premiums consumed pro tanto the amount of dividends thereafter payable to Charles E. Golden, the insured.
By the aboye analysis it is clear that in effect these premiums were really paid by the stockholder through payments in form made by the corporation. In substance these facts are shown by -stipulation as follows: “The amount of undistributed earnings and profits of the Company was at all times in excess of the aggregate cash surrender value of, or premiums paid on, said policies of insurance, and was on April 9, 1934, in excess of the total amount collected by the Fidelity Trust Company under, said policies.”
By the tripartite agreement, what the stockholder, Golden, and his corporation had in view was that “the corporation and the stockholder desire that upon the death of the stockholder the insurance so‘ carried on his life shall be paid to the Trustee.” This purpose -was to be effected by the act of the corporation, viz, “The Corporation has or will hereafter cause to be made payable to the Trustee, the policies of insurance carried on the life of the Stockholder, in which the Corporation is now named as beneficiary.”-
It will thus appear that by the agreement and the act of the corporation the policies were surrendered by the corporation — -“The trustee hereby acknowledges the receipt of the policies of- insurance as stated above and agrees to hold them subject to the conditions herein set forth”— and all ownership and control and legal title thereof so far as the corporation was concerned was vested in the trustee subject to its obligation and agreement that “Upon receipt of due notice of the death of the said. Stockholder, the Trustee shall collect the proceeds of the policies of insurance on his life, which have been deposited hereunder, and shall distribute the same in manner following: (1) The said proceeds shall be paid directly to the several stockholders of the Corporation in amounts proportionate to the number of shares of stock of the Corporation which they may respectively own at the date of such distribution.”
It will thus appear that by the agreement the corporation ceased to be the beneficiary and the trustee became the formal legal beneficiary and the stockholder the real and equitable owner of the policy.
Any powers thereafter to be exercised by the corporation were stated and only exercisable with the consent of the stockholder, viz, “The corporation and the stockholder reserve the right at all times without the consent or approval of the Trustee: (a) To hypothecate policies of insurance deposited hereunder for the purpose of making loans thereon, (b) To receive all dividends which may accrue on account of said policies during the lifetime of the Stockholder.” And further, the corporation expressly renounced the right “to sell or assign any -of the policies deposited hereunder, (b) To exercise any option or privilege granted in the said policies not hereinabove specifically reserved to itself, (c) To change the beneficiary in the said policies without the formal consent of the stockholders and the approval of the Trustee.”
It will be noted that by the last quoted provision of the agreement the corporation concedes that it is no longer the beneficiary and that it has no power left to change the beneficiary “without the formal *595consent of the stockholders and the approval of the trustee.”
It is contended that the present case is controlled by Cummings v. Commissioner, 1 Cir., 73 F.2d 477, 479. I do not so regard it. The gist of the transaction in that case is summarized as follows: “It seems to us that the records of the company clearly show that it was the intent of all parties that these proceeds should go to swell the assets of the company. It paid the premiums, took the policies out in its own name, and it was understood both by the officers of the company and the common stockholders that when the proceeds thereof were received they would be so mingled with the other company assets that it would be necessary to declare a dividend in order to separate and give each individual stockholder a right to his proportionate part according to the number of shares in the company he held.”
It will be observed that in that case the company never surrendered or renounced any right, never ceased by its own agreement to be the beneficiary — a situation wholly different from the present. There the corporation was, and never ceased to be, the beneficiary. It collected the proceeds of the policy as a beneficiary, appropriated such assets to surplus and distributed it as such.
In my view the facts and acts of the parties are wholly different and the Board in the present case committed error in sustaining the contention of the Commissioner.
For these reasons I respectfully dissent from the opinion of the court.