I find myself unable to agree with the conclusion reached by the majority; hence I respectfully enter this dissent. A general statement of the nature of the case and the facts involved appears in the majority opinion. It may be well to add to that statement the following salient facts:
The record discloses, without dispute, that S. F. Carter, Jr., generally known as Fain Carter, procured the issuance of the two insurance policies in question, aggregating $200,000, pursuant to a resolution passed by the board of directors of the *Page 774 Houston Development Company. This board was composed of Fain Carter and the appellees Dunn and Walling, who also constituted all of the stockholders of this corporation. This resolution, unanimously adopted by the directors, read as follows: "Resolved: That S. F. Carter, Jr., President of the Houston Development Company, be empowered to insure his life for the protection of indebtedness of the Houston Development Company and the endorsements of the directors of the company. The amount not to exceed $200,000.00, and pay the premiums out of the funds of the Houston Development Company."
All of the evidence in the record conclusively shows that this resolution, in providing that this amount of insurance should be taken out "for the protection of indebtedness of the Houston Development Company and the endorsements of the directors of the Company," referred to the indorsements of the appellees Dunn and Walling on the notes sued upon in this case. After the passage of this resolution, Fain Carter applied for life insurance in the very amount provided for in the resolution, to wit, $200,000, and this very amount fitted with almost exact nicety the debts of the company which the insured wanted to protect with the insurance which he purchased. He approached Hans W. Rasmussen, agent of the Ætna Life Insurance Company, who wrote the policies in question. Mr. Rasmussen testified that Fain Carter told him he wanted to take out some business insurance; "that he and Mr. Dunn and Mr. Walling (appellees) had had a meeting previously with reference to his taking out this insurance, and he said he wanted to take it out for the purpose of protecting these two men. He said it would leave them in a hell of a shape in the event of his death." The insured further told Mr. Rasmussen he wanted insurance in the sum of $200,000, of the five-year term type, but, because of certain regulations of the insurance company, the amount was divided into two policies, one of $170,000 of the five-year kind, and one for $30,000 of the ordinary life.
It is thus conclusively shown that it was the purpose and intention of Fain Carter, in procuring this $200,000 of insurance, that the proceeds of such policies be used for the payment of the obligations sued upon by appellants, which fact the jury found in response to the first issue submitted to it. Without going too far into the very clear and convincing evidence sustaining this jury finding, it may be added that, in addition to the resolution and the testimony of the agent who wrote the policies in question, two other disinterested witnesses, C. O. Woolsey and L. B. Jones, both of whom were business associates of Fain Carter in his other enterprise, the Fain Carter Home Building Company, testified to facts clearly showing that Fain Carter had procured these policies pursuant to the resolution passed and for the purpose of protecting Dunn and Walling against loss by reason of their indorsements of the notes involved in this suit.
The total amount of the premium on the ordinary life policy was paid out of funds belonging to the Houston Development Company by that company's check, and one-half of the premium on the term policy was paid in the same manner by the Houston Development Company. Appellees Dunn and Walling owned approximately 50 per cent. of the stock of this company and Fain Carter the other one-half. The balance of the premium on the term policy was paid by Fain Carter personally. Appellants contributed nothing whatever toward the payment of these premiums.
The facts above detailed, together with other facts appearing in the record, some of which were testified to by witnesses introduced by appellants, lead irresistibly to the conclusion that Fain Carter in fact procured these policies of insurance with the definite purpose and intention that the notes sued upon in this case should at his death be liquidated from the proceeds of these policies.
I cannot agree with the statement made in the second paragraph of the opinion of the majority, where it is stated that the bank and Carrie B. Carter, independent executors and cotrustees, were trustees for the estate of Carter, Sr., deceased, and Carrie B. Carter only, as I think they were also trustees for Dunn and Walling, as I shall later show.
I also disagree with the statement in the twelfth paragraph of the opinion, where it is stated it became necessary for plaintiffs as executors of the estate of Carter, Sr., to bring this suit.
Appellants were liable upon the notes sued on as guarantors, while appellees were liable thereon as indorsers. The record shows that appellant, the estate of S. F. Carter, Sr., deceased, was possessed of a very large amount of property. Knowing *Page 775 that this estate, his father's estate, would be called upon to pay these notes, along with Dunn and Walling, Fain Carter did the natural thing in designating his father's estate as the beneficiary of these policies. It conclusively appears from the record that Fain Carter did not want his friends and associates, Dunn and Walling, in the event of his death, to bear the burden of discharging this indebtedness. As president and general manager of the corporation, and actively in charge of its affairs, he felt responsible for the indorsement of his friends, Dunn and Walling. It appears entirely reasonable that Fain Carter should have designated the guarantor of these notes, the S. F. Carter, Sr., estate, as the beneficiary in these policies, since he well knew that an application of the proceeds by such beneficiary in a manner consistent with his repeatedly declared purpose and intention and in accordance with the resolution adopted by directors of the Houston Development Company would entirely discharge the estate from its liability on the guaranty, and at the same time free his friends and associates from any liability on their indorsement. He was not an attorney, and hence wholly unfamiliar with any technical rule about varying the terms of written instruments by parol evidence. He had placed evidence of his purpose and intention as to how the proceeds of these policies should be applied in the minutes of the Houston Development Company, and, no doubt, assumed that the executor of his father's estate would carry this declared purpose into effect.
The majority opinion seems to be based on the erroneous premise that appellees are seeking to uphold the right to alter the terms of the insurance policies through the introduction of parol testimony, and, furthermore, are attempting to effectuate a change in the designated beneficiary. This is a misconception of appellees' real contention and defense. It cannot be questioned that the only right the Carter, Sr., estate could assert to the proceeds of the policies was by reason of its debtor-creditor relationship to the insured. Before the Carter, Sr., estate, the designated beneficiary in said policies, could legally hold the proceeds thereof, it was essential that it make a showing of the existence of an indebtedness owing to it by the insured. See Wilke v. Finn et al., 39 S.W.2d p. 836, by the Commission of Appeals. Thus the designated beneficiary itself was required to offer extrinsic evidence in order to establish its right to receive and hold the proceeds of such policies. It would seem anomalous to hold that, although the named beneficiary must itself resort to extrinsic evidence showing the existence of a creditor-debtor relation in order to establish its right to the proceeds of the policies, proof adduced by appellees which would show the particular indebtedness forming the basis of this relationship would occasion a variance of the terms of the policy. The beneficiary designated in the policies is not sought to be changed through the introduction of evidence merely showing the particular debts the creditor-beneficiary is to discharge thereby. The proceeds of the policies are paid to the very beneficiary designated therein in absolute harmony with the terms of the policy. It was not sought to have payment of the proceeds made to another and different beneficiary. Appellees' contention is that, since it appears without dispute that the assured procured these policies with the declared purpose and intention of protecting Dunn and Walling, as well as his father's estate, the beneficiary received the proceeds of the policies as a trustee charged with the duty of applying such proceeds in accordance with the intention and purpose of the assured. The law itself placed upon the beneficiary of these policies the duty to show wherein it had an insurable interest in the life of the assured; that is, to disclose the basis of its right and claim to the proceeds. This extrinsic evidence necessary to be introduced before the beneficiary could hold the proceeds merely defines the relationship between the beneficiary and the insured, which the policy fails to do and which must be done before the beneficiary could be legally entitled to hold the proceeds. To say that evidence is admissible to show the existence of an indebtedness owing by the insured to the beneficiary, but that evidence showing the particular indebtedness which the insured intended to be discharged from the proceeds of the policies is inadmissible, seems palpably erroneous; yet that is the very rule of law the decision of the majority of this court establishes in this case.
Nor does the introduction of such evidence violate the statutes of our state relating to the designation of beneficiaries in insurance policies, as seems to be held by the majority opinion. These statutes merely define the rights of the parties arising with the insurer and have no application whatsoever in a contest between the *Page 776 designated creditor-beneficiary and other parties claiming rights and equities in and to the proceeds after they have come into the hands of the beneficiary designated in the policy.
Beginning with the decision of the Supreme Court in the early case of James v. Fulcrod, 5 Tex. 512, 55 Am.Dec. 743, and later broadened by the decision in Allen v. Allen, 101 Tex. 362, 107 S.W. 528, the courts of this state have consistently held that a parol trust may be shown in either personalty or realty, even though the contract or conveyance involved be entirely clear and unambiguous. No sound reason exists why the same doctrine should not be applied to the facts of this case.
Since the insured, Fain Carter, reserved the right, under the provisions of the policies in question, to change the beneficiary thereof at will (which clearly appears from the policy in evidence), the designated beneficiary acquired no vested interest therein, Splawn v. Chew, 60 Tex. 532; Farracy v. Perry (Tex.Civ.App.) 12 S.W.2d 651, writ refused; Fuos et al. v. Dietrich (Tex.Civ.App.) 101 S.W. 291; Texas Jurisprudence, vol. 24, § 73, which could operate to prevent a parol trust being engrafted by Carter on the proceeds of such policies in the hands of the designated beneficiary.
The evidence offered by appellees showing that the creditor-beneficiary was a trustee charged with the duty of applying the proceeds of the insurance policies upon the debt sued upon does not constitute a variance or an alteration of the provisions of the policy. It seems clear that this is nothing more than explanatory of the designation made in the policy. The courts of this state have uniformly held that parol evidence is admissible to explain the terms of a written instrument. See, for instance, Pope v. Anthony, 29 Tex. Civ. App. 298, 68 S.W. 521, writ of error refused.
The majority opinion states that the finding of the jury that Fain Carter procured the policies in question for the purpose and with the intention of protecting appellees Dunn and Walling as well as the Carter, Sr., estate, against the payment of the obligations herein sued upon is not sufficient to entitle appellees to a judgment because the designated beneficiary (Carter, Sr., estate) had not been served with notice of this intention. In other words, it is distinctly held by the majority that one collecting and receiving the proceeds of a policy for a certain purpose, as a trustee, must have notice of the creation of the trust before the death of the insured in order for it to constitute a valid and binding trust.
This holding is at variance with the well-established rule that notice to a trustee is not essential to the creation of a voluntary trust. Without exception, the leading text-writers on the subject of "Trusts" state that notice to the trustee is not essential in order to create a valid trust. The following quotation from Perry on Trusts, § 105, p. 137, is illustrative of this view: "Nor is notice to the cestui que trust or to the trustee and acceptance by him, essential to the validity of a voluntary trust as against the settlor, if it is otherwise perfectly created. But the absence of notice may become a fact of more or less importance in determining whether the trust is perfectly created or not. As between purchasers for value, notice or no notice may have important effects; but a voluntary trust, as between the settlor, the trustee, and the cestui que trust, can be perfectly created without it."
Substantially, the same rule is announced in 6 Pomeroy's Equity Jurisprudence, § 1007; Bogert on Trusts, p. 72; Lawrence on Equity Jurisprudence, vol. 1, p. 125.
This court, in the case of Clausen v. Jones, 18 Tex. Civ. App. 376,45 S.W. 183, 184, 185, had occasion to decide the identical question here presented. The insured, William Jones, carried a benefit certificate with the Knights of Pythias in the amount of $3,000, payable upon his death to his wife, Elvine Jones. Three minor children by a former marriage intervened in an action brought by the beneficiary to recover the proceeds of the policy. The children alleged that their father did not intend to vest his wife with the entire amount of the proceeds of the policy by designating her as the sole and only beneficiary, but, on the contrary, that he intended for her to receive only one-third of the proceeds and the children the other two-thirds. They further alleged that it was the intention of the insured, William Jones, to ingraft, and the law acting upon that intention did ingraft, a parol trust upon the certificate in favor of the children to the extent of this two-thirds interest, notwithstanding the fact that the policy made no mention thereof and that it designated his wife as the beneficiary without restriction or limitation. The children alleged that *Page 777 the insured made frequent declarations with respect to their interest in the certificate disclosing a clear intention that the designated beneficiary was to collect their interest for their use and benefit. The designated beneficiary denied that the insured ever created or ingrafted a parol trust upon the certificate. A judgment was rendered upon a verdict of the jury in favor of the named beneficiary, the wife. In the opinion of this court it is stated:
"The interveners distinctly averred the parol trust created and ingrafted by William Jones upon the benefit certificate was power given the plaintiff to collect the whole amount of the insurance secured by the benefit certificate, and nothing more. This being the extent of the trust confided to her, we cannot see that Mrs. Jones' conduct towards the children was relevant or pertinent to the issue joined between the parties. Mrs. Jones denied the existence of a trust, and the interveners averred that the trust only authorized her to collect the whole of the money. * * * The fourth error assigned is the refusal of the court to give the following requested charge (No. 1) asked by interveners, which is, in substance, that William Jones had the power to direct in express terms that his children should share in the proceeds of his benefit certificate, provided he plainly designated the funds to be shared, and the persons who should partake of the funds, and the amount or proportion which the persons entitled should respectively receive. The testimony of the witness Frank H. Jones tended to establish the issue distinctly made by the pleadings, — the interveners affirming, and the plaintiff denying, — `Did or did not Wm. Jones designate his children and his wife as the beneficiaries of the benefit certificate, with the declaration that his wife should receive one-third, and the children two-thirds.' The interveners had the right to have this issue distinctly submitted to the jury. This was not done by the court's charge, and we think the charge requested should have been given."
The decision of the majority is squarely in conflict with the holding in the above case. There is nothing in the record here to differentiate this case from that one.
The Austin Court of Civil Appeals, in the case of Jackson et al. v. Hughes, 52 S.W.2d 687, 689, held that a parol trust could be shown in the proceeds of an insurance policy, "although the policy may be entirely silent upon the subject." The beneficiary named in the policy was Duwain E. Hughes, trustee. It did not appear upon the face of the policy in what manner the proceeds were to be applied. On the trial of the case, the insurance agent, who had obtained the policy for the insured, was permitted to testify with respect to the declarations made by the insured as to her intention relative to the application of the proceeds of said policy. It was urged on appeal that the insurance agent could not testify to the declarations of the insured because such declarations varied the terms of the written policy. This position was rejected by the appellate court. In its opinion the court, speaking through Judge McClendon, said:
"The provisions of the policy to the effect that it embodied the entire contract of the parties and that the beneficiary could not be changed except with the consent of the insured had reference only to the relations between the insurer and the insured. The policy does not purport to define the relations between the insured and the beneficiary. A trust may be shown by parol in the beneficiary, although the policy may be entirely silent upon the subject and the insurer in entire ignorance thereof. This principle has been extended to cases in which the cestui que trust was not of a class who might be beneficiaries under the policy. Kerr v. Crane, 212 Mass. 224, 98 N.E. 783, 40 L.R.A.(N.S.) 692; Lashley v. Lashley, 212 Ala. 255, 102 So. 229; Crews v. Crews' Adm'r,113 Ky. 152, 67 S.W. 276; Johnston v. Scott, 76 Misc. 641, 137 N.Y.S. 243.
"Appellee was not disqualified to testify under R. S. art. 3716. No party to the suit was claiming the proceeds of the policy as an heir of Mrs. Jackson; nor were such proceeds any part of her estate. Grand Lodge, etc., v. Dillard (Tex.Civ.App.) 162 S.W. 1173.
"The testimony of the insurance agent which we hold to be competent and admissible clearly and unequivocally establishes an active trust."
This case was recently passed upon by the Commission of Appeals [81 S.W.2d 656], in which the opinion rendered by Judge Critz was adopted by the Supreme Court. Although the Commission of Appeals differed with the Court of Civil Appeals on one particular phase of the case, it expressly approved the holding above set forth. Unquestionably, the doctrine announced by the majority is in conflict with *Page 778 that declared by Judge Critz, which was expressly approved by the Supreme Court.
The courts of other states have many times announced the rule that notice to the trustee is not essential to the creation of a valid and binding trust. A few of the leading cases so holding are the following: Minot v. Tilton, 64 N. H. 371, 10 A. 682; Donithen v. Independent Order of Foresters, 209 Pa. 170, 58 A. 142; O'Brien v. Holden, 104 Vt. 338,160 A. 192; Northrip v. Burge, 255 Mo. 641, 164 S.W. 584. The holding of the majority, therefore, seems to be squarely in conflict with a former decision of this court, a holding by the Austin Court of Civil Appeals which received the approval of the Supreme Court, and with the overwhelming weight of authority as established by the courts of last resort throughout the land.
The intention of the insured in cases of this kind has been held controlling and paramount by the courts of this and other states in many cases. The writer can perceive no sound reason why this intention should not be given full force and effect in this case. It would unduly lengthen this opinion to attempt to review the many cases which sustain the views herein expressed, but among their number may be cited the following: Mullins v. Thompson, Adm'r, 51 Tex. 7; Raley v. Ross, 59 Ga. 862; Grant's Adm'rs v. Kline, 115 Pa. 618, 9 A. 150; Harrel's Adm'r v. Harrel,232 Ky. 469, 23 S.W.2d 922; Hancock v. Fidelity Mutual Life Ins. Co., 53 S.W. 181 (Court of Chancery Appeals of Tennessee); American Life Health Ins. Co. v. Robertshaw, 26 Pa. 189; Springfield Mutual Association v. Ogle, 248 S.W. 977 (Missouri Court of Appeals); Mutual Life Ins. Co. of New Jersey v. Cummings, 66 Or. 272, 126 P. 982,133 P. 1169, 47 L.R.A.(N.S.) 252, Ann.Cas. 1915B, 535; Pace v. Pace,19 Fla. 438; Mutual Life Ins. Co. v. Devine, 180 Ill. App. 422; Northern Life Insurance Company v. Burkholder, 131 Or. 537, 283 P. 739; and Loos v. John Hancock Mutual Life Ins. Co., 41 Mo. 538, 539.
It is argued in the majority opinion that, if a parol trust may be ingrafted upon the proceeds of an insurance policy, a wide field will be opened for fraudulent claims. This proposition might be dismissed with the statement that our Supreme Court does not seem to have been very much impressed with the force of this argument, as in the early years of our jurisprudence it established the right of a grantor to ingraft a parol trust upon his solemn deed of conveyance, and this rule, although since many times vigorously assailed, has been steadily adhered to by that court.
The real answer, however, to the dangers which the majority assume may arise from following the rule permitting a parol trust to be ingrafted upon the proceeds of an insurance policy in the hands of the designated beneficiary, is that ample protection is afforded against such frauds by the application of the rule declared by our Supreme Court with reference to the quantum of proof required to sustain the existence of a parol trust, which is that the proof adduced must be of such a clear and convincing nature as to satisfy the mind of the court that a trust was intended to be created. In the ordinary civil case, it is sufficient if there be some evidence to sustain the finding of the court or jury. Not so, however, when a parol trust is claimed to exist. A much greater burden is placed upon the party seeking to establish such trust. The proof offered by him to establish the same must be so clear and convincing as to satisfy the minds, not only of the trial court, but of the appellate judges as well, that a trust was in truth and in fact intended to be created. Under this salutary rule there is little room for fraud. On the other hand, to deny the right to ingraft a parol trust upon the proceeds of an insurance policy in the hands of a named beneficiary, when the evidence is clear and convincing that the assured, the one who has the right to give direction to the object of his bounty, intended for such proceeds to be used for a particular purpose, would operate in many instances to bring about the grossest kind of fraud and imposition.
The facts shown by this record well illustrate this view. Here the undisputed evidence shows that Fain Carter took out the insurance policies for the definite and specific purpose of protecting, not alone the Carter estate, but also his associates, Dunn and Walling, who had come to his aid and assistance by indorsing his paper for a large sum of money. By such indorsement they had put themselves in a position where they might sustain a very large financial loss. It appears from the undisputed evidence that, when Carter took out these policies, he was inspired by the laudable object and purpose of protecting these loyal friends from financial ruin. *Page 779 The decision of the majority absolutely thwarts the admitted purpose and intention of the assured in this respect, and this, notwithstanding the fact that it appears that the premiums on the policies involved were largely paid by funds, a substantial portion of which actually belonged to Dunn and Walling as stockholders of the Houston Development Company.
Whether following the rule to permit a parol trust to be ingrafted upon the proceeds of an insurance policy in the hands of the designated beneficiary will open a field for fraud when it is safeguarded by the rule requiring the same to be established by clear and convincing testimony is open to serious question, but it is not open to question that the result of the majority opinion in this case is to perpetrate a grave injustice against those whom the assured indisputably intended to protect in this case, and, if the doctrine announced by the majority is permitted to stand as the law of this state, unquestionably many similar injustices will result.
I strongly feel that the majority of this court, in holding that the jury's finding did not entitle appellees to a judgment, have completely ignored the well-established principles of law aforementioned. In so doing, the avowed purpose and intention of the insured-elements always given great weight and viewed with extreme respect by the courts-were entirely disregarded. In this case, more so than many others where the intention and purpose of the insured were given controlling effect, natural justice demands an application of the law which will permit the proceeds of these policies to be applied in accordance with the unquestioned will and desire of the insured. The writer is convinced that a refusal to give effect to the uncontroverted facts and to the jury's finding, a refusal to uphold the intention and purpose of the insured in procuring these policies of insurance, operates, in this instance, as a travesty on justice.
Wherefore I am unable to agree with the majority in the reversal of the trial court's judgment and its rendition for appellants, but, to the contrary, I find that the law and the undisputed evidence demand an affirmance of the judgment of the trial court.
I have been greatly assisted in the preparation of the foregoing dissenting opinion by the very able and exhaustive brief of able counsel for appellees Dunn and Walling, and have availed myself of the expressions and reasons so well stated in the brief as to why the judgment of the trial court should, in all things, be affirmed, and I here now adopt same as my own.