Moore v. Security Trust & Life Ins. Co.

• Decision Date: 23 March 1909
• Docket Number: 2,793.
• Citation: 168 F. 496
• Parties: MOORE et al. v. SECURITY TRUST & LIFE INS. CO.
• Court: U.S. Court of Appeals — Eighth Circuit

168 F. 496

MOORE et al. v. SECURITY TRUST & LIFE INS. CO.

No. 2,793.

United States Court of Appeals, Eighth Circuit.

March 23, 1909

(Syllabus by the Court.)

A contract by a life insurance company, whereby it turns over its property and business to a rival company and incapacitates itself to continue its insurance business, is not a breach of a contract of appointment of agents which contains no agreement fixing the time such appointment shall continue.

A contract by a life insurance company whereby, at or after the lawful conclusion of the term of the agency, it turns over to a rival company all its business and property and disables itself from collecting future renewal premiums, does not constitute an anticipatory breach of an agreement with its agents that after the termination of the agency commissions will be paid them on such premiums as collected by the company, which will sustain an action for the present worth of the commissions before the renewal premiums have become due or been collected.

The general rule is that a principal may revoke and an agent may renounce the appointment of the latter, in the absence of an agreement that it shall continue for a specific term.

The right of an insurance company to manage its business, to determine the term of its continuance, whether or not, and when, if at all, it will reinsure its risks, turn over its business to another company, and cease to carry it on, is vital to its existence, success, and the due exercise of its corporate power, and it is impliedly reserved in contracts of agency which contain no agreements to the contrary.

The exercise of this right and the consequent termination of the agency is no breach of a contract of agency which contains no agreement forbidding or limiting the exercise of this right.

The presumption of the reservation of this right is superior to the implication from the existence of clauses in an agency contract, unnecessary if the agency is at will, specifying causes for its termination.

The rule that where one party to an agreement disables himself from its performance, or gives notice that he will not fulfill it, the other may maintain an action for damages for the anticipatory breach before the time of performance arrives, applies to mutually executory contracts.

It does not govern actions on bonds, notes, or upon contracts for the payment of money at times specified, which are completely executed by the parties of one part.

Robert Stone (Troutman & Stone and D. R. Hite, on the brief), for plaintiffs in error.

Frank Ewing, for defendant in error.

Before SANBORN and VAN DEVANTER, Circuit Judges, and W. H. MUNGER District Judge.

SANBORN Circuit Judge.

Is an agreement by a life insurance company, whereby it turns over all its business and assets to a rival company and incapacitates itself to continue its insurance business a breach of a contract of appointment of agents which contains no stipulation fixing the time the appointment shall continue? Does a contract by a life insurance company whereby, at or after the lawful conclusion of the term of the agency, it turns over to a rival company all its business and assets and disables itself from collecting future renewal premiums upon its policies, constitute an anticipatory breach of an agreement with its agents that after the termination of their agency commissions will be paid on such future premiums as collected by the company, which will sustain an action for the present worth of the future commissions before the renewal premiums have become due or been collected?

These are the questions which are presented in this case by a demurrer to the complaint, which the court below sustained. The contract between the defendant insurance company and its agents, the plaintiffs, was in writing, and it took effect on May 15, 1904. By the terms of that agreement the insurance company appointed the plaintiffs its agents in the state of Kansas and promised to pay them certain commissions during the continuance of their agency, and that after the termination of the contract a commission of 7 1/2 per cent. would be paid to them on renewal premiums upon the insurance which they obtained as these premiums were collected by the company. The contract provided that the agreement of agency, with the exception of the stipulation that the commission on the future renewal premiums should be paid after its termination, should cease if the authority of the company to operate in Kansas terminated, if the agents withheld funds, policies, or receipts of the company 30 days after they should have been transmitted to it, or 30 days after they were demanded by the company, and if either party for just and reasonable cause gave 30 days' notice of its termination. It contained no stipulation that the insurance company would continue the appointment of the agents, or that the plaintiffs would continue to serve as agents, for any length of time. There was an agreement in it that the agents should pay all the expenses of conducting the business transacted under the terms of the contract. In September, 1906, the defendant made a contract with the Pittsburg Life & Trust Company whereby it turned over to that company all its business and property and disabled itself from continuing in the business of life insurance and from collecting the future renewal premiums upon insurance secured by the plaintiffs, which insurance amounted to more than $1,000,000, and it notified the plaintiffs of this fact and that the contract of agency was terminated. The present worth of the plaintiff's commission on the future renewal premiums upon this insurance was $18,792.60, and they had expended $8,370 in the promotion of the defendant's business during the agency in reliance upon reimbursement from its continuance. Upon these alleged facts the plaintiffs demand judgment for $27,162.96.

It is a general and indisputable rule of law that the principal may revoke and the agent may renounce the latter's appointment at will and at any time, without committing any breach of the contract of agency and without incurring any liability for damages. There are exceptions to this rule, as where the agent acquired an interest, not in the fruits or profits of the thing, but in the thing itself which is the subject-matter of the agency. Hunt v. Rousmanier, 8 Wheat. 175, 203, 5 L.Ed. 589. But the agents acquired no such interest in this case, and it is useless to consider or discuss this or other exceptions that are equally inapplicable. In view of the general rule, which has been stated, parties who intend that their contracts of agency shall exist for definite times embody in their contracts express provisions that they shall continue for specified terms, and the absence of such a provision in a contract of agency raises a strong presumption that it was an agency at will.

Counsel argue that the provisions of this contract that it should terminate (1) 30 days after the agents failed to transmit due or demanded funds, policies, or receipts, (2) when the authority of the company to operate in Kansas should terminate, and (3) for just and reasonable cause on 30 days' notice, show that the parties intended to agree, and, therefore, did contract by implication, that the contract of agency should be permanent. There is persuasive force in this contention; but there are other considerations not less convincing. The basic rule for the ascertainment of the true meaning of a contract is to examine all its terms in the light of the situation of the parties when it was made, and to deduce from them the true intention of those who signed it. This agreement contained stipulations that the agents 'shall devote their time and best energies to the service of said company,' and 'pay all the expenses of conducting the business transacted under the terms of this contract,' but no provision that they shall continue to do so during the term of their natural lives or during any other specified time. Did the plaintiffs intend by that contract to undertake through health and sickness, through profitable and unprofitable business, through fortune and misfortune, to pay the expenses of and to devote all their time and energies to the insurance business of the defendant in Kansas during the term of their natural lives and to subject themselves to damages for a failure to do so? The question is susceptible of but one rational answer. They must have intended to reserve their right, at their own free will and without liability for damages, to renounce this agency whenever the unprofitableness of its business, the superior inducements of other business, or occupation or location, or the health or comfort of themselves or their families, should convince them that it was either their duty, their interest, or their pleasure so to do; and if they had renounced the agency at any time for any of these reasons no court could have sustained a judgment against them for a breach of their contract. Their right thus to renounce was impliedly reserved to them in the contract, and the defendant took the chances of their exercise of it when it made the agreement without any stipulation that they should serve it for a definite time.

The defendant was a corporation empowered by the state to conduct the business of life insurance. It was and is common knowledge, of which the parties to this contract could not have been ignorant, that more than 60 per cent. of the companies that embark in that business fail to find it profitable and in a few years either reinsure their risks and turn over their business to some other company, or become insolvent and abandon their attempt to insure the lives of their policy holders.

The right to determine what risks it should accept and what it...