Castle, Chief Judge, and Duffy, Senior Circuit Judge and Kiley, Circuit Judge.
This appeal arises from an interpleader action brought by American Casualty Company to determine the beneficiaries of a $50,000 life insurance policy issued to appellant, MSL Industries, on the life of Elmer E. Stanley, a plant manager of MSL's Howard Industries Division. The executor of Mr. Stanley's estate, the First National Bank of Kenosha, Wisconsin, claimed all the proceeds, and MSL claimed half the proceeds. The district court, in an opinion reported at 283 F. Supp. 757 (E.D. Wis. 1968), awarded all of the proceeds of the policy to the estate.
MSL paid the premium on the insurance policy in question under a plan in which life insurance was provided for selected employees. MSL alleges that under the plan the employees selected were required to name MSL, which was also the policy holder, beneficiary of half the proceeds. It is claimed that Mr. Stanley failed to sign the usual beneficiary form since he left for vacation before the forms were supplied by the insurance company. While on vacation, Mr. Stanley died in a fire at sea and thus never signed a beneficiary form. The policy provided that in absence of designation of a beneficiary, the proceeds would be payable to the estate.
At trial, MSL adduced evidence showing its consistent requirement that it be designated beneficiary of half the proceeds of the insurance policies it purchased for employees. MSL also set forth, in an offer of proof, that the Vice President of Marketing of the Howard Industries Division would have testified that he had explained the plan to Stanley, who orally agreed to designate MSL as beneficiary of half the proceeds. The district court, however, sustained the estate's objection to this testimony on the basis of the Wisconsin Dead Man's Act, Wisconsin Stat. Ann. § 885.16.
Although the court below later reversed its decision on the applicability of the Dead Man's Act, it held that "even on the assumption that MSL proved all that it offered to prove, it would still not be entitled to judgment in this action" since it did not "establish its claim to equitable entitlement by a clear and convincing showing." 283 F. Supp. at 759, 760.
The first issue on appeal is whether the district court was correct in holding the Wisconsin Dead Man's Act inapplicable. That statute provides that "no stockholder, officer or trustee of a corporation from, through or under whom" the corporation derives its beneficial interest is competent to testify as to transactions with a deceased person. The district court found that the Vice President of Marketing of the Howard Industries Division, W. Arthur Ernst, "was neither a director, officer, nor shareholder of MSL and hence does not fall within the coverage of the Wisconsin Dead Man's Act." 283 F. Supp. at 759. We agree.
First of all, Ernst, who had once been a stockholder of MSL, had sold his stock by the time of trial, thus removing any objection on the ground that he was a stockholder of the corporation. Will of McNaughton, 138 Wis. 179, 188, 118 N.W. 997, reh'g denied, 120 N.W. 288 (1908). Second, there is no contention that Ernst was a trustee of MSL. Finally, Ernst was only an officer of MSL's unincorporated Howard Industries Division, not of the corporation itself.
Since statutes in derogation of the common law, such as the Dead Man's Act, must be strictly construed, Treglown v. Dept. of Health & Social Services, 38 Wis. 2d 317, 156 N.W. 2d 363, 368 (1968), and since Mr. Ernst does not fall within the generally accepted meaning of a corporate officer, we hold that he does not fall within the coverage of the statute and therefore his testimony should have been admitted.
We come, then, to the issue of whether the district court applied the correct legal principles in finding for the estate. We hold that it did not, and accordingly reverse the judgment entered below and remand the case for further proceedings.
The district court held that even if MSL proved all that it offered to prove, the estate would still be entitled to all the proceeds. Thus, the issue is whether MSL, the holder and purchaser of the policy, would be entitled to half the proceeds by virtue of an oral agreement on the part of the insured, Mr. Stanley, to designate MSL as beneficiary of half the proceeds. The court below relied on the following pertinent provisions of the policy:
"Entire Contract; Changes: This Policy (including the endorsements and attached papers) and the Application of the Policyholder constitute the entire contract between the parties, and any statement made by the Policyholder shall be deemed a representation and not a warranty. No such statement shall avoid the insurance or reduce the benefits under this Policy or be used in defense to a claim hereunder unless it is contained in a written application. No change in this Policy shall be valid unless approved by an executive officer of the Company and unless such approval be endorsed hereon or attached hereto. No agent has authority to change this Policy or to waive any of its provisions.
"Indemnity for loss of life will be payable in accordance with the beneficiary designation and the provisions respecting such payment which may be prescribed herein and effective at the time of payment. If no such designation or provision is then effective, such indemnity shall be payable to the estate of the Insured Person.
"Designation and Change of Beneficiary; Assignment: The Insured Person shall have the right, on forms furnished to the Policyholder by the Company, to designate a beneficiary or beneficiaries. The right to change of beneficiary is reserved to the Insured Person. . . . No change of beneficiary or assignment of interest under the Policy shall be binding upon the Company ...