195 F.Supp. 385 (D.Minn. 1961), 4-60 Civ. 200, Helsby v. St. Paul Hospital & Cas. Co.

Docket Nº:4-60 Civ. 200.
Citation:195 F.Supp. 385
Party Name:Walter HELSBY, Plaintiff, v. ST. PAUL HOSPITAL AND CASUALTY COMPANY and Mutual Benefit Health and Accident Association, Defendants.
Case Date:June 26, 1961
Court:United States District Courts, 8th Circuit, District of Minnesota
 
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Page 385

195 F.Supp. 385 (D.Minn. 1961)

Walter HELSBY, Plaintiff,

v.

ST. PAUL HOSPITAL AND CASUALTY COMPANY and Mutual Benefit Health and Accident Association, Defendants.

No. 4-60 Civ. 200.

United States District Court, D. Minnesota

June 26, 1961

Page 386

[Copyrighted Material Omitted]

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Irvin Schermer, Sheldon J. Gensler, Schermer & Gensler, Minneapolis, Minn., for plaintiff.

John P. Vitko, Donald B. Smith, Randall, Smith & Blomquist, St. Paul, Minn., for defendants.

HENLEY, District Judge.

This suit, based upon an alleged breach of contract, was tried to Court and jury. The jury found in favor of plaintiff and assessed his damages at $156,000. Defendants have moved for judgment notwithstanding the verdict or, in the alternative, for a new trial. The case may be stated as follows:

On September 23, 1957, plaintiff entered into a 'Broker's Contract' with defendant St. Paul Hospital and Casualty Company, hereinafter called St. Paul, under the terms of which plaintiff was authorized to sell in Minnesota health and accident insurance for the company and was to be compensated on a commission basis. The contract was for an indefinite period, terminable at the death of plaintiff or upon his becoming physically or mentally disabled. It was also terminable at the option of either party upon the giving of six months' written notice.

It was the intention of the parties that plaintiff should occupy himself, at least primarily, with the establishment and operation of the so-called 'bank franchise' plan for the sale of health and accident insurance and the servicing of policies sold under that plan. Among other things plaintiff was to recruit, train, and supervise the agents necessary to put the plan into effect and to operate it efficiently and profitably. 1 It was

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agreed that plaintiff should receive commissions amounting to 20 percent of the original premiums on policies sold by him personally, and a five percent over-write commission on original premiums on policies sold by agents working under him. The contract provided further that if plaintiff should die or become totally and permanently disabled, or should retire from the insurance business, or if he should faithfully comply with the terms of the contract and should the contract be terminated voluntarily, he should have a vested right to certain commissions on renewal premiums on policies written by him or his agents during the life of the contract. The amount of such commission on renewal premiums was to be based upon the number of years plaintiff remained in the service of St. Paul and upon the gross premiums in force at the end of the calendar year prior to termination of the contract.

The parties operated under the Broker's Contract until December 1958, at which time they entered into an 'Agent's Agreement,' back-dated to September 23, 1957, the effective date of the original Broker's Contract. The Agent's Agreement, hereinafter at times called the contract, was executed by plaintiff on his own behalf, and on behalf of the company by M. M. Imm, its president, and C. I. Pilot, its assistant treasurer and bookkeeper.

The Agent's Agreement contained in general the same provisions as were set forth in the original Broker's Contract, but there was an important change in the termination provisions. St. Paul's standard form of Agent's Agreement provided for termination upon the death or disability of the agent, and also provided for termination at the option of either party upon the giving of 30 days' written notice of intention to terminate. However, in plaintiff's contract the standard termination provision was modified so as to provide for voluntary termination upon 12 months' written notice 'with cause.'

In the latter part of August 1959, defendant Mutual Benefit Health & Accident Association, hereinafter called Mutual, purchased all of the stock of St. Paul and assumed control of its operations, with Frank J. Hogan, one of the vice presidents of Mutual becoming president of St. Paul. On August 31, 1959, E. S. Adams, one of Mutual's senior vice presidents and its Agency Director, addressed a letter to plaintiff advising him that Mutual had assumed St. Paul's obligations under the latter's agency contracts.

On June 23, 1960, St. Paul, acting through Oscar A. Lipke, its vice president, and one Gesell, its treasurer, wrote a letter to plaintiff advising him that St. Paul was rescinding the contract on account of alleged nonperformance and breach on plaintiff's part. In the same letter St. Paul assumed an alternative position, namely that if it was not entitled to rescind the contract, nevertheless it had 'cause' to terminate the agreement in accordance with the provisions thereof, and that the letter should be considered as a notice of termination effective after 12 months. Nine alleged causes for termination were set forth.

On the same day St. Paul addressed a letter to the Minnesota Department of Insurance cancelling plaintiff's license to sell St. Paul policies. This suit followed.

It is the theory of plaintiff that the contract in suit was a valid and enforceable contract, that he performed his obligations thereunder, that he was guilty

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of no breach and had given St. Paul no cause for termination under the contract, and that St. Paul's action of June 23, 1960, was wholly wrongful. Plaintiff measures his damages by the present value of the net commissions, including commissions on renewal premiums (at times referred to as vested renewals), which he claims he would have earned but for the alleged wrongful termination of the contract.

Both defendants contend that the contract was void for various reasons, or that, if valid, the plaintiff failed to perform under it and was guilty of breach of contract. It is further contended that the contract was actually terminable at the will of either party notwithstanding the stipulation that voluntary termination should be 'with cause' and upon 12 months' written notice. Both defendants also take issue with plaintiff as to damages.

In addition Mutual takes the position that it never assumed St. Paul's obligations under its agency contracts, and that, even if plaintiff is entitled to relief as against St. Paul, he has no claim against Mutual.

Upon the trial of the case the Court took the view, to which it now adheres, that under the evidence all questions of the validity and interpretation of the contract were for the Court. Hence, the case was sent to the jury on the theory that, apart from any questions of nonperformance or breach, the contract was in and of itself a valid enforceable instrument and the jury was so instructed.

The issues submitted to the jury were, in substance, the following: (1) whether plaintiff had performed his obligations under the contract; (2) whether any breach of contract of which plaintiff may have been guilty had been waived by defendants; (3) whether Mutual had assumed St. Paul's obligations to its agents; (4) whether St. Paul had 'cause' to terminate the contract on 12 months' notice; and (5) damages.

In their instant motion defendants renew their attacks on the validity of the contract and reassert their position that the contract, if valid, was terminable at will. They also assail the jury's factual findings including the finding as to damages. 2 In addition, defendants complain of alleged errors of the Court in ruling on certain questions of admissibility of evidence and in refusing to give certain instructions. To the extent that defendants challenge the factual findings of the jury, the evidence at the present stage of the proceedings is required to be viewed in the light most favorable to plaintiff, and he is entitled to the benefit of all favorable inferences that may be drawn logically from the evidence.

I.

Taking up first the legal contentions of the defendants directed at the validity and interpretation of the contract, defendants contend that the contract is void for indefiniteness and for lack of mutuality of obligation, that the contract was a modification of the original Broker's Contract and did not comply with the requirements of the earlier agreement with regard to modifications, that the agents of St. Paul who executed the contract on its behalf acted beyond the scope of their authority, and that in any event the contract was terminable at the will of either party. In connection with the contention last mentioned, defendants assert that the provision for termination 'with cause,' which by implication prohibits a termination without cause, was not supported by any independent consideration or by any consideration at all, and that the phrase 'with cause' is vague and indefinite and does not set up a discernible criterion by

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which a right to terminate may be measured.

Those contentions have been argued earnestly in defendants' thorough brief in support of their motion, but the Court is unable to accept any of them. The Court is convinced that as a matter of law the contract was valid and enforceable and that it was not terminable at the volition of either party without cause. 3

The evidence discloses that in connection with his performance under the original Broker's Contract plaintiff received substantial assistance from two of St. Paul's home office employees. As time went on, however, those two individuals began to play a more and more active part in the operation of the bank franchise plan, and plaintiff, not without justification, became apprehensive that they would simply take over the plan after he had done the ground work, and that his contract would be terminated as could have been done upon six months' written notice.

Plaintiff repeatedly requested Mr. Lipke, the vice president of St. Paul, to curtail the...

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