Corporations – Ultra Vires Act – Effectiveness of Action by Informal Meeting of Board of Directors
Defendant insurance company issued a policy on the life of the president of plaintiff corporation with the corporation named as beneficiary. The president, his wife in the capacity of secretary-treasurer, and son were the sole stockholders of the corporation. Pursuant to a divorce agreement between the president and his wife, a part of the insurance policy was assigned to the wife at an informal board of directors’ meeting with the concurrence of the wife and son. The president died and his stock was sold to the present stockholders. The corporation then sued the insurance company to collect the full amount of the insurance policy, declaring that the previous assignment was void. Defendant, having already paid the wife her share as prescribed by law, contended that it could not be required to pay again to the corporation the amount which it had already paid. At the time of the assignment, the corporation was apparently solvent and up to the time of the trial no existing or subsequent creditor had objected to the assignment. The district court entered a decree for the corporation. On appeal, held, reversed. Plaintiff corporation and the new stockholders claiming through the deceased president are estopped to deny the validity of the assignment executed at the informal board of directors meeting. Philadelphia Life Ins. Co. v. Crosland-Cullen Co., (4th Cir. 1956) 234 F. (2d) 780.