29 Cal.2d 34, 17196, Speegle v. Board of Fire Underwriters

Docket Nº:17196
Citation:29 Cal.2d 34, 172 P.2d 867
Opinion Judge:[12] Traynor
Party Name:Speegle v. Board of Fire Underwriters
Attorney:[7] Edward R. Solinsky, Philip C. Boardman and James F. Boccardo for Appellant. [8] Robert W. Kenny, Attorney General, Clarence A. Linn, Deputy Attorney General, and Max Radin, as Amici Curiae on behalf of Appellant. [9] Joseph T. O'Connor, Long, Levit, Cunningham & White, Orrick, Dahlquist, Neff...
Case Date:September 20, 1946
Court:Supreme Court of California

Page 34

29 Cal.2d 34

172 P.2d 867

XUM H. SPEEGLE, Appellant,


BOARD OF FIRE UNDERWRITERS OF THE PACIFIC (an Association) et al., Respondents.

S. F. No. 17196.

Supreme Court of California

Sept. 20, 1946

In Bank.

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[Copyrighted Material Omitted]

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[172 P.2d 868] Edward R. Solinsky, Philip C. Boardman and James F. Boccardo for Appellant. Robert W. Kenny, Attorney General, Clarence A. Linn, Deputy Attorney General, and Max Radin, as Amici Curiae on behalf of Appellant.

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Joseph T. O'Connor, Long, Levit, Cunningham &amp White, Orrick, Dahlquist, Neff, Brown &amp Herrington and Bardin &amp Herrington for Respondents. O'Melveny &amp Myers, Louis W. Myers, Allen G. Wright, Randell Larson and Sidney L. Weinstock, as Amici Curiae on behalf of Respondents.


[172 P.2d 869] TRAYNOR, J.

Plaintiff brought this action to recover actual and exemplary damages for alleged injury to his business by defendants. The trial court sustained defendants' demurrers to plaintiff's second amended complaint without leave to amend and entered judgment for defendants. Plaintiff appeals.

The following facts are alleged in the second amended complaint: Plaintiff has been an insurance agent in Salinas since 1927, and since 1937 has also done business there as an insurance broker. He entered into written contracts of agency with the 14 defendant insurance companies and with defendant Pennsylvania Underwriters, hereinafter referred to as one of the defendant insurance companies. Defendant insurance companies are all members of defendant Board of Fire Underwriters of the Pacific, an association of fire insurers, hereinafter referred to as the board. In the early part of 1939, the board, acting in concert with defendant Salinas Association of Local Insurance Agents, hereinafter referred to as the agents' association, accused plaintiff of violating his contracts with the members of the board by placing insurance, as agent or as broker, with nonboard companies. Plaintiff states that he placed most of his business with board members but that when the interest of his customers required it, he placed insurance with nonboard companies. He denies that this practice constituted a violation of his contracts with board companies. In March, 1939, following an investigation by the board into plaintiff's practices, defendants caused three of the board companies to terminate their agency contracts with him. In July of that year the board threatened to cause the 12 other board companies to terminate their contracts with plaintiff, unless he immediately ceased to represent nonboard companies and relinquished his broker's license. Upon plaintiff's refusal to comply with these conditions, defendants caused the termination of his remaining contracts with board companies.

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Plaintiff also alleges that he entered into the insurance agency and brokerage business in Salinas and made his contracts with defendant companies in reliance upon certain usages of the insurance trade; that under such usages an agency contract is permanent and "will not be cancelled except for good and lawful cause," an agent is under no duty to place all insurance with the company or companies for which he is agent and is free to place insurance with other board and nonboard companies, and also is free to engage in the business of an insurance broker and in that capacity to place insurance with other companies according to the wishes or interests of the applicants.

Plaintiff further alleges that it is the purpose of the board through coercion and oppressive methods, and otherwise, to dominate and control "the class of insurance written by its members ... fix the terms, conditions and rates for such insurance," determine the terms upon which board members may employ agents, dominate and control the business of such agents and of brokers who act as agents for board members, and by such methods to "limit and restrict and restrain fair competition in said insurance business and as between brokers; and ... unlawfully to create and carry out restraints and restrictions upon the business and business methods of such agents and brokers and upon fair competition in placing insurance to the [172 P.2d 870] best advantage of those who may require or who may desire insurance of the classes written by the ... members of said Board."

Plaintiff contends that defendants had no right to require him to represent only board companies and relinquish his broker's license; that their conduct amounted to an unjustified interference with his contractual relations and, on the part of defendant insurance companies, to a breach of contract; and that their attempt to dominate or destroy his business was part of a conspiracy to restrain the insurance trade in Salinas. The following questions are thus presented for decision: I. Are defendants liable for breach of contract or interference with plaintiff's contractual relations? II. Has plaintiff properly raised in his pleadings the question of defendants' liability for restraint of trade? III. Has plaintiff stated a cause of action under statutory (Bus. & Prof. Code, sections 16700 to 16758, known as the Cartwright Act) or common law rules against restraint of trade? IV. Is the Cartwright Act constitutional? V. Does the Sherman Anti-Trust Act preclude the application of state law?

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I. Are defendants liable for breach of contract or interference with plaintiff's contractual relations?

The complaint does not set forth any of the agency contracts, but pleads them according to their legal effect. As to their duration it merely alleges that in the insurance business such contracts are customarily regarded as being permanent and revocable only for cause. Plaintiff's contention that in terminating the contracts defendant companies committed breaches thereof rests therefore entirely upon that allegation. A contract for permanent employment, however, is only a contract for an indefinite period terminable at the will of either party (Lord v. Goldberg, 81 Cal. 596 [15 Am.St.Rep. 82]), unless it is based upon some consideration other than the services to be rendered. (Brown v. National Electric Works, 168 Cal. 336 ; Davidson v. Laughlin, 138 Cal. 320 [5 L.R.A.N.S. 579]; Millsap v. National Funding Corp., 57 Cal.App.2d 772 ; Seifert v. Arnold Bros., Inc., 138 Cal.App. 324 ; see Otten v. Spreckels, 183 Cal. 252 .) Since plaintiff has not alleged such consideration, it cannot be concluded that defendant insurance companies violated their contracts with him.

Plaintiff contends, however, that defendants unlawfully interfered with his contracts on the grounds that none of the contracts would have been terminated had the decision rested solely with each insurance company, that the termination of the contracts was brought about by pressure upon the companies brought by the board, assisted by the agents' association, and that each company was influenced by the others acting in concert.

Intentional and unjustifiable interference with contractual relations is actionable in California as in most other jurisdictions. (Imperial Ice Co. v. Rossier, 18 Cal.2d 33 ; see cases collected in 84 A.L.R. 43.) Recognizing that the fact that a contract is "at the will of the parties, respectively does not make it one at the will of others," (Truax v. Raich, 239 U.S. 33, 38 [36 S.Ct. 7, 60 L.Ed. 131, Ann.Cas. 1917B 283, L.R.A. 1916D 545]) the great majority of the cases have held that unjustifiable interference with contracts terminable at will is actionable. (Hitchman Coal & Coke Co. v. Mitchell, 245 U.S. 229 [38 S.Ct. 65, 62

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L.Ed. 260]; United States Fidelity & Guaranty Co. v. Millonas, 206 Ala. 147 [89 So. 732, 29 A.L.R. 520]; Berry v. Donovan, 188 Mass. 353 [74 N.E. 603, 108 Am.St.Rep. 499, 3 Ann.Cas. 738, 5 L.R.A.N.S. 899]; London Guarantee & Acc. Co. v. Horn, 206 Ill. 493 [69 N.E. 526, 99 Am.St.Rep. 185]; see cases cited in 84 A.L.R. 43, 60; see, also, Prosser, Torts, 981; 1 Callmann, Unfair Competition, section 33.1; Carpenter, Interference With Contract Relations, 41 Harv.L.Rev. 728, 742.) Interference with such contracts may be justified under certain circumstances. (Imperial Ice Co. v. Rossier, 18 Cal.2d 33, 36 ; McGee v. Collins, 156 La. 291 [100 So. 430, 34 A.L.R. 336]; Triangle Film Corp. v. Artcraft Pictures Corp., 250 F. 981, 982 [163 C.C.A. [172 P.2d 871] 231]; see cases collected in 84 A.L.R. 79; Rest. Torts, sections 766-774; Prosser, Torts, 996, 982; 1 Callmann, Unfair Competition, section 33.1; Holmer, Privilege, Intent and Malice, 8 Harv.L.Rev. 1, 9; Carpenter, Interference With Contract Relations, 41 Harv.L.Rev. 728, 745; 30 Am.Jur. 80.) Each company is of course interested in the loyalty of its agents, and, like any other principal, may require an agent to represent it exclusively or to represent only such other principals as have interests in common with it. Collective bargaining, which is an important part of modern employment relations, is carried on in recognition of the fact that employers as well as employees may organize for the purpose of furthering their common interests and that such organizations may bring pressure upon their members to include in their contracts certain terms and conditions or to terminate contracts that do not contain such terms and conditions. (Bentley v. Mountain, 51 Cal.App.2d 95, 99 ; G. S. Smith Met. Market v. Lyons, 16 Cal.2d 389, 400 ; Bautista v. Jones, 25 Cal.2d 746, 749, 754, 771, 780 ; Parkinson Co. v. Bldg. Trades...

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