Langdeau v. Bouknight

• Decision Date: 01 March 1961
• Docket Number: No. A-7826,A-7826
• Citation: 162 Tex. 42,344 S.W.2d 435
• Parties: C. H. LANGDEAU, Receiver, Petitioner, v. M. A. BOUKNIGHT, Respondent.
• Court: Texas Supreme Court

Page 435

344 S.W.2d 435

162 Tex. 42

C. H. LANGDEAU, Receiver, Petitioner, v. M. A. BOUKNIGHT, Respondent.

No. A-7826.

Supreme Court of Texas.

March 1, 1961.

Rehearing Denied April 5, 1961.

Cecil C. Rotsch, Norman V. Suarez, A. M. LeCroix and Harold G. Kennedy, Austin, for petitioner.

Marvin Schulman, Houston, for respondent.

GRIFFIN, Justice.

In this cause petitioner, Langdeau, as plaintiff, sued respondent, Bouknight, as defendant, for recovery of premiums and unearned commissions alleged due by Bouknight to Langdeau as Receiver of U. S. Truct & Guaranty Company for policies written by Bouknight in the Trust & Guaranty Company prior to its being placed in receivership. Langdeau also sued for attorney's fees under Art. 2226, Vernon's Annotated Civil Statutes, verifying his petition, thus claiming his suit was upon a sworn account as set out under Art. 2226.

The case was tried before the court without a jury, and judgment was rendered against Bouknight for the amounts sued for, plus $1,200 attorney's fees.

Bouknight appealed to the Court of Civil Appeals. That Court concluded that Bouknight was liable for the unearned commissions and the earned premiums on policies written by Bouknight, whether collected by him or not, and all premiums collected by him prior to the cancellation of the policy and not forwarded to the Company, less earned commissions. That Court reversed that part of the trial court's judgment awarding to Langdeau unearned premiums not collected by Bouknight from the policyholder, and Langdeau's recovery of attorney's fees. Tex.Civ.App., 333 S.W.2d 670. Both parties applied for a writ of error to this Court. We granted Langdeau's petition, and it followed, as a matter of our practice, that we granted Bouknight's application also.

We affirm in part, and reverse and remand in part the judgment of the Court of Civil Appeals.

At the time Bouknight was employed by U. S. Trust & Guaranty Company, as agent, the parties entered into a written agency contract. On December 22, 1955, Honorable Chas. O. Betts, Judge of the 98th District Court of Travis County, on application of the State of Texas, placed the U. S. Trust & Guaranty Company in temporary receivership, and on December 23, 1955 ordered all policies of insurance cancelled as of that date. This receivership was made permanent and the Trust Company was placed in liquidation on January 31, 1956. Langdeau is the duly appointed and acting liquidator, sometimes called 'Receiver' of said Trust Company.

Langdeau's suit against Bouknight involved about 235 policies which were in force on December 23, 1955, and cancelled on that date by order of the receivership court. Such policies had been written by Bouknight as agent of the Trust Company over about a three-year period prior to the Trust Company being placed in receivership. Except for approximately thirty-nine 'in-force' policies written during the months of September, October, November, and December, 1955, it is undisputed that the net premiums on all other of such 'inforce' policies had been paid by Bouknight to the Trust Company. As to the thirty-nine policies, they were reported in the respective monthly reports called 'accounts current', to the Trust Company for the month in which each was written. In submitting such accounts current, after reporting the gross premium, credit was then taken for his full commission on such policies, a net premium balance was shown to be owed to the Trust Company totaling $1,744.35 for the months of September, October, November, and December, 1955. The Receiver's sworn account, totaling $3,707.69, was composed of two categories: (1) the net premium balance of $1,744.35 due on the thirty-nine policies which had been reported and unpaid by the agent, and (2) the sum of $1,963.34 representing unearned portion of the agent's commission on all 235 policies canceled by the Receiver. It was this total amount which the trial court found Bouknight owed on his agency account.

The provisions of the agency contract are clear and unambiguous. By its terms Bouknight agreed to pay to the Trust Company within sixty days all premiums of policies written by him in the Company 'whether such premiums have been collected or not, less commissions.' These premums were due for premiums on policies issued during the months of September, October, November, and December, 1955, prior to the Trust Company being placed in receivership. The correctness of the items making up this total balance was not questioned, but Bouknight claimed he was liable only for the amount of the premiums he had actually collected from the policyholders and had not remitted to the Trust Company. Bouknight made no claim that he had paid any part of these amounts shown on his monthly accounts current reports.

After the Trust Company was placed in receivership and its policies cancelled, Bouknight reinsured some of his customers in other insurance companies, and paid the premiums on such reinsured policies out of his own funds. He had taken assignments from such policyholders of their claims against the Trust Company for these unearned premiums. All such assignments were dated after the institution of the receivership proceedings. The total of such assignments was the sum of $7,347.80. A claim for this total had been presented by Bouknight to the Receiver and had been approved by the receivership court as a general unsecured claim. Art. 21.28, Sec. 3(g) of the Insurance Code, V.A.T.S., specifically prohibits allowance of any claim on the part of any person where 'the obligation of the insurer to such person was purchased by or transferred to such person subsequent to the commencement of the delinquency proceedings or with a view of its being used as an offset, * * * the obligation of such person is as a trustee or fiduciary.' The agency contract herein contained provision to the effect that all monies collected by the agent for the Trust Company should be held by the agent in a fiduciary capacity until transmitted to the Trust Company. The above provision of the Insurance Code, when applied to the facts of our case, prohibits these assigned amounts from being used as an offset to Langdeau's claim against Bouknight.

Bouknight claims he is liable to Langdeau only for the payment of earned premiums collected by him and not forwarded to the Trust Company. His reasoning for his nonliability is that upon the Trust Company's being placed in receivership, the policyholders each had a claim against the Receiver, Langdeau, for unearned premiums on their policies; that having reinsured these policyholders and having paid the premiums on such reinsurance out of his own funds, he had discharged the liability of the Trust Company to pay such unearned premiums to the policyholders, and, therefore, having made the policyholders whole, he, Bouknight, is subrogated to the rights which the policyholders had against the Trust Company in the amounts Bouknight had paid for the Trust Company in discharge of the cliams of the policyholders. Stated in another way, Bouknight argues that had the Receiver sued the policyholders for any premiums on policies, Langdeau could only have recovered the earned portion of the premiums and not the unearned portion. This was by virtue of the fact that there would be a partial failure of consideration as far as the Trust Company and the policyholders are concerned due to the cancellation of the policies prior to the expiration dates, and, therefore, no insurance in force for the full time as covered by the premium. From this argument, Bouknight rpoceeds to argue that he is entitled to take the place of the policyholder in so far as the Trust Company is claiming premiums on any particular policy from Bouknight. By the same line of reasoning, Bouknight contends that he would not be liable to the Trust Company for any commissions which he had withheld from the unearned premiums theretofore remitted to the Trust Company. He says this would be true because the Trust Company could not collect any part of the unearned premiums from the policyholders, but the policyholders would have a claim against the Trust Company for such unearned premiums paid. These unearned premiums due the policyholders by the Trust Company would include the unearned commissions deducted by Bouknight when he remitted the premiums to the Trust Company.

We do not agree with Bouknight's reasoning. First and foremost, such reasoning is in direct conflict with Bouknight's obligations under his agency contract That contract specifically provides, as applicable to unearned commissions, that 'it is a condition of this agreement that the agent shall refund ratably to the company on business heretofore or hereafter written commissions on cancelled liability and on reduction in premium at the same rate at which such commissions were originally retained.' As to the payment of the premiums on the policies issued by Bouknight whose premiums had not been remitted, the agency contract provides that 'the agent shall not later than 60 days from the close of the month in which such policies were effective pay to the company the premiums thereon, whether such premiums have been collected or not less commissions.' Clearly these provisions of the agency contract fix Bouknight's liability to the Receiver to pay the amounts sued for by the Receiver for the two above items.

The case of Wheeler v. Metteauer, 1955, Tex.Civ.App., 283 S.W.2d 95, 98, no writ history, was a case involving a plea of privilege filed by Wheeler in a suit against him brought by Metteauer. Metteauer alleged that he was an insurance agent, and, as such, had issued policies to certain individuals in Century Lloyds; and that because of dissatisfaction with Century Lloyds because of its inability to pay claims against it, these policies were assumed by Commercial Security Insurance Company; that thereafter, and while the policies were in force, Commercial Security...