Metcalf v. Security Intern. Ins. Co.

• Decision Date: 20 December 1977
• Docket Number: No. 9382,9382
• Citation: 261 N.W.2d 795
• Court: North Dakota Supreme Court
• Parties: Judith METCALF, the Executrix of the Estate of Fred L. Metcalf, Deceased, Plaintiff-Appellant, v. SECURITY INTERNATIONAL INSURANCE COMPANY, a corporation, Defendant-Appellee. Civ.

Page 795

261 N.W.2d 795

Judith METCALF, the Executrix of the Estate of Fred L Metcalf, Deceased, Plaintiff-Appellant, v. SECURITY INTERNATIONAL INSURANCE COMPANY, a corporation Defendant-Appellee.

Civ. No. 9382.

Supreme Court of North Dakota.

Dec. 20, 1977.

As Amended Jan. 11, 1978.

Rehearing Denied Feb. 2, 1978.

Ohnstad, Twichell, Breitling, Arntson & Hagen, West Fargo and Russell D. Maring, Ltd., Fargo, for plaintiff and appellant; argued by Leland F. Hagen, West Fargo.

Tenneson, Serkland, Lundberg & Erickson, and Ronald H. McLean, Fargo, for defendant and appellee; argued by Chester J. Serkland, Fargo.

PAULSON, Justice.

This is an appeal by the plaintiff, Judith Metcalf, the Executrix of the Estate of Fred L. Metcalf, Deceased (hereinafter Judith) from the judgment of the Cass County District Court entered on April 18, 1977.

The decedent, Fred L. Metcalf (hereinafter Metcalf) entered into a written employment contract with the defendant, Security International Insurance Company, a corporation (hereinafter Security) on November 29, 1963. Pursuant to this contract Metcalf was employed as a "sales management agent" to "manage and supervise the sale of insurance" issued by Security.

Metcalf and Security executed a written contract on December 22, 1967, which modified the 1963 contract, and they executed another written contract on June 26, 1972, which modified the 1967 contract.

Metcalf died on June 8, 1974. Judith filed an action against Security on May 7, 1976, in the Cass County District Court requesting the court to construe the legal rights, obligations, and duties existing between Metcalf and Security pursuant to their contractual agreements, and to order Security to make all required payments according to the court's interpretation of the contracts.

A trial was held on August 16, 1976, before the court without a jury. The 1963 and 1972 contracts were introduced and admitted into evidence. The 1967 contract was attached to Security's answer but was never introduced or admitted into evidence. However, Judith and Security have stipulated on appeal, through counsel at oral argument, that the 1967 contract shall also constitute part of the appellate record. The relevant provisions of the 1963, 1967, and 1972 contracts are as follows:

THE 1963 CONTRACT

"4. As compensation for his services described in the preceding paragraph, during the term of this contract, the Company shall pay the Employee a percentage of the premiums received by the Company on policies issued by the Company during the term of this contract, regardless of who has produced said business, as per the following schedule:

                                                               PER CENT OF PREMIUM
                                         PER CENT OF PREMIUM    ON INSURANCE SOLD
                                          ON INSURANCE SOLD     BY GENERAL AGENTS
                POLICY YEAR              BY SPECIAL PRODUCERS      AND AGENTS
                -----------------------  --------------------  -------------------
                1st year                     4 1/6%                 4 1/6%
                2nd year and each            1 1/2%                 2/3 of 1%
                year thereafter
                through the 10th year
                11th year and each year      1%                     2/3 of 1%
                thereafter during the
                life of the policy
                

"In addition, Employee shall be paid an annual fee during the life of this contract as follows in part payment for his services:

                     1st year--  $8,400.00
                     2nd year--   7,200.00
                     3rd year--   6,000.00
                     4th year--   4,800.00
                     5th year--  and each year thereafter
                Employee's compensation shall be based
                only upon commissions in accordance with
                the schedule immediately hereinbefore
                set forth
                

"6. In the event that conditions and terms of Paragraph 5 above are met, then this contract shall be renewed automatically for another two-year period, and this contract shall be automatically renewed at the end of each succeeding two-year period on compliance with the quotas established in Paragraph 5 above, until the 21st day of May, 1983, on which date this contract shall expire in any event.

"9. The Company has executed identical contracts with three employees, Ardis G. Bunker, David B. Johnson and Fred L. Metcalf. In the event of death, disability or termination of employment by the Employee for any reason during the term of this contract, the terminated employee, or his estate if he is not living, shall receive the commission compensation provided for in Paragraph 4 on insurance in force at the date of such termination and, in addition, for a period of twenty (20) years from the date of such termination one-third of one (1/3 of 1%) per cent commission on collected premium income of the Company. . . ."

THE 1967 CONTRACT

"WHEREAS, EMPLOYEES desire more compensation than that provided in their Employment Contract dated November 29, 1963, because of their need to pass on a portion of their present compensation to insurance salesmen as an additional incentive.

"NOW THEREFORE, It is agreed that the COMPANY shall pay to each EMPLOYEE or ESTATE an additional one (1) per cent of all of the premium income received by the COMPANY since January 1, 1967. The COMPANY has the option of terminating this compensation on 2 year's notice. In the event of such termination, the EMPLOYEE or ESTATE will continue to receive the one (1) per cent on all Insurance premiums on insurance sold up to the date of such termination, for so long as the premiums on the insurance that was sold during that period are paid to the COMPANY, but not on that insurance sold after such termination.

"In the event of death, disability or termination of employment by the Employee for any reason during the term of this contract, the terminated employee, or his estate if he is not living, shall receive the commission compensation provided for on insurance in force at the date of such termination. . . .

THE 1972 CONTRACT

"WHEREAS, the COMPANY and EMPLOYEES desire to modify that agreement dated December 22, 1967, between the parties hereto, and which also related to that Employment Contract, dated November 29, 1963.

"NOW, THEREFORE, it is agreed as follows:

1. Each EMPLOYEE shall continue to receive the 1 per cent on all premium income of the COMPANY on policies with a policy date prior to July 1, 1972.

2. On policies with a policy date on, and after July 1, 1972, 3 per cent of the premium income received by the COMPANY on all insurance and annuities sold by the three EMPLOYEES or their agents, shall be pro-rated among the three EMPLOYEES in direct proportion to the amount which the premium income produced by each EMPLOYEE, or his assigned agents, bears to the total premium income.

4. In the event of death, disability or termination of employment by the EMPLOYEE for any reason during the term of this contract, the terminated EMPLOYEE, or his estate if he is not living, shall receive the commission compensation provided for on insurance sold prior to his death, disability or termination of employment."

The trial judge issued his findings of fact, conclusions of law, and order for judgment in which he concluded that the 1972 contract modified and superseded the 1963 contract. In accordance with the trial judge's interpretation of the contracts, judgment was entered on April 18, 1977, in which judgment the court ordered, in pertinent part, as follows:

"2. Judith Metcalf, the Executrix of the Estate of Fred L. Metcalf, deceased, as plaintiff, is entitled to a commission of one percent on all premium income paid to Security International Insurance Company on insurance policies with a policy date prior to July 1, 1972, and thereafter three percent of the premium income paid and received by the Security International Insurance Company on all insurance policies and annuities sold by the decedent, Fred L. Metcalf, and his agents. This compensation continues until May 25, 1983, at which time the obligation to pay compensation ceases."

Judith now appeals from the judgment of the district court asserting that the trial judge erred in his interpretation of the contracts. Judith requests this court to construe the contracts, to reverse the judgment, and to award to Metcalf's estate the following:

1) Commissions, in accordance with the schedule provided in paragraph four of the 1963 contract, on all policies written prior to Metcalf's death, for so long as premiums are paid on those policies;

2) Commissions of 1/3 of 1 percent, for twenty years from the date of Metcalf's death, on all premium income collected by Security;

3) Compensation of 1 percent on all premium income received by Security on policies issued between January 1, 1967, and June 30, 1972, for so long as Security receives premiums on those policies;

4) A pro rata compensation share, in accordance with paragraph two of the 1972 contract, on 3 percent of the premiums received by Security, on insurance policies issued between July 1, 1972, and the date of Metcalf's death, for so long as Security receives premium income on those insurance policies; and

5) Interest on all sums due from Security and unpaid.

Security asserts that the trial court's interpretation of the written contracts involved findings of fact which cannot be set aside by this court on appeal unless they are clearly erroneous pursuant to Rule 52(a) of the North Dakota Rules of Civil Procedure. Judith asserts, on the other hand, that the district court's interpretation of the written contracts was based solely on documentary evidence and therefore this court's review is not limited by Rule 52(a), N.D.R.Civ.P. Judith contends that this court should independently examine and construe the written contracts.

The object of interpreting and construing a contract is to ascertain and give effect to the intention of the parties. Delzer Construction Co. v. New Marian Homes Corp., 117 N.W.2d 851 (N.D.1962). The construction of a written contract to determine its legal effect is always a question of law for the court to decide. Floyd v. Ring Const. Corporation, 165...