Harper v. National Life Ins. Co.

• Decision Date: 06 June 1893
• Parties: HARPER et al. v. NATIONAL LIFE INS. CO. OF MONTPELIER.
• Court: U.S. Court of Appeals — Third Circuit

56 F. 281

HARPER et al. v. NATIONAL LIFE INS. CO. OF MONTPELIER.

United States Court of Appeals, Third Circuit.

June 6, 1893

M Hampton Todd, (W. B. Broomall, on the brief,) for plaintiffs in error.

Lincoln L. Eyres and John G. Johnson, for defendant in error.

Before ACHESON, Circuit Judge, and BUTLER and WALES, District Judges.

WALES District Judge.

This was an action brought in the circuit court of the United States for the eastern district of Pennsylvania against Alexander Harper and Benjamin W. Blakeley, as sureties of William V. Harper, on their joint and several bond for the penal sum of $20,000, dated November 19, 1888, and given to the National Life Insurance Company of Montpelier, Vt. The recitals and condition of the bond are as follows:

'Whereas, in and by a certain agreement in writing by and between the said National Life Insurance Company and said William V. Harper, bearing date the 28th day of July, 1888 said Harper was appointed the general agent of said company for the states of Maryland, Virginia, Delaware, and the District of Columbia, and did agree to perform, as such general agent for said company, certain duties in the said agreement specified; and whereas, the said National Life Insurance Company is also about to advance the sum of fifteen thousand dollars as a special loan to the said William V Harper, at the request of all the parties hereto, and upon his promissory note for that amount, dated November 19, 1888 Now, the condition of this obligation is such that if said Harper shall and do well and truly comply with all the terms, conditions, and covenants contained in said agreement on the part of said Harper to be kept, done, and performed, and shall account for and pay over to said company, when and as required by said company, all commissions arising to him, the said Harper, under said contract, save only the sum of two hundred and fifty ($250) per month, and shall also pay over, when and as received by him, the whole renewal interest due said Harper by such Equitable Life Assurance Society of the United States, (it being expressly guarantied and agreed by said Harper that the money so paid over by him in each month shall not be less than the sum of five hundred [500] dollars,) and shall also pay, or cause to be paid, to said company, all balance of indebtedness that may be due and owing to said company by said Harper upon any termination of said above-recited agreement, or upon said promissory note of fifteen thousand dollars as hereinabove recited, or for any other indebtedness between said parties, and shall and will in all respects save, indemnify, and hold harmless said company of, from, and against any and all loss, cost, damage, or expense by reason or on account of any default or failure on the part of said Harper so fully to perform all the conditions hereof without fraud or further delay, then this obligation to be void; otherwise, to be and remain in full force and effect.'

At the trial it was proved that William V. Harper, the principal in the bond, had become indebted to the insurance company, on a shortage in his accounts as its agent, and the nonpayment of his promissory note, in a sum of not less than $30,000. This indebtedness was not denied, but the sureties claimed that they were not liable for the default of their principal because of certain acts done by the insurance company, without their consent, subsequent to the date of the bond--First, in changing to rates of commission to be allowed to William V. Harper, as provided for in the agreement of July 28, 1888; second, in giving an extension of time to the said Harper for the payment of his indebtedness to the company. The learned judge of the circuit court charged the jury that the evidence did not sustain either branch of the defense, and instructed them to find a verdict for the plaintiff. Eleven assignments of error have been filed, but all of them may be substantially embraced in two, which will be noticed in their order.

On April 6, 1889, a supplemental agreement was entered into by the insurance company and William V. Harper, by which certain changes were made in the rates of commissions to be allowed him 'on all new business, and its renewals, written on and after April 15, 1889.' The average result of these changes was rather favorable to the agent, unless the new business should be limited to a particular subclass of life policies. It was contended on behalf of the sureties that any change in the agent's compensation, made without their consent, discharged them; and a fortiori would they be entitled to their discharge if the effect of the change increased their risk. In support of this proposition it was argued that as all the commissions allowed to Harper, over and above $250 per month, were to be paid over to the company in reduction of his note, any change in the rates, by which the amount of the commissions would be reduced, would increase the balance of his indebtedness, and thus increase the risk of his sureties. It is true that under the original agreement between the company and their agent the former reserved the right to offset against his commissions any debt due or owing to them from him, but there is nothing in the agreement, or in the conditions of the bond, which can be construed to mean that the company was obliged to compel the appropriation of the agent's commissions to the payment of his debt. It was optional with the company to make such appropriation or not, but it was the duty of the agent to pay over the excess of the commissions 'when and as required by said company.' The amount of commissions earned by the agent, whether large or small, would depend on his industry in soliciting and obtaining premiums on policies of insurance; but he was at all times bound by his agreement and by the...