National Surety Co. v. Page, 3248.

• Decision Date: 22 April 1932
• Docket Number: No. 3248.,3248.
• Citation: 58 F.2d 145
• Parties: NATIONAL SURETY CO. v. PAGE.
• Court: U.S. Court of Appeals — Fourth Circuit

58 F.2d 145 (1932)

NATIONAL SURETY CO. v. PAGE.^*

No. 3248.

Circuit Court of Appeals, Fourth Circuit.

April 22, 1932.

H. H. Little and W. R. L. Taylor, both of Norfolk, Va. (Hughes, Little & Seawell, of Norfolk, Va., on the brief), for appellant.

Robert W. Shultice and E. A. Bilisoly, both of Norfolk, Va., for appellee.

Before PARKER, and NORTHCOTT, Circuit Judges, and HAYES, District Judge.

PARKER, Circuit Judge.

This is an appeal in an action at law instituted to recover damages for malicious prosecution. The plaintiff in the court below was one R. Lee Page, former agent of the National Surety Company. The company was defendant. The declaration alleged that the company maliciously and without probable cause instituted a proceeding before the State Corporation Commission of Virginia to revoke the license of Page as an insurance agent authorized to do business in the state; that the proceeding had been dismissed; and that Page had been damaged in his business and reputation, and had suffered damage to his feelings as a result of the institution of the proceedings. A demurrer to the declaration was overruled, and the company then pleaded the general issue, and as special grounds of defense alleged that the proceedings complained of were instituted in good faith and with probable cause, without malice, and under advice of counsel after full disclosure. There was verdict for Page in the sum of $25,000; and from judgment thereon the company has appealed. We need consider only two of the questions presented by the assignments of error: (1) Whether an action for malicious prosecution will lie on account of the institution of proceedings under the Virginia statute to revoke the license of an insurance agent; and (2) whether the evidence in the court below was sufficient to sustain a finding that the proceedings against Page were instituted without probable cause.

The proceedings to revoke the license of Page were instituted under section 4235 of the Code of Virginia as amended, which provides that every insurance company doing business in the state shall file annually with the State Corporation Commission a list of the agents authorized to solicit insurance for it in the state, and that each agent shall be required to secure a certificate of registration from the commission for each company which be proposes to represent. It further provides that the commission may for good cause refuse to register any agent or may "at any time that it may come to its knowledge that any agent has misappropriated any premium entrusted to him, or has failed to apply said premium as directed by the policyholder or prospective policyholder, or has been guilty of rebating, twisting the policies of other companies, of misrepresenting the provisions * * * or has violated any of the provisions of section four thousand two hundred and twenty-two of the Code of Virginia, revoke or suspend the certificate of registration of said agent."

The proceedings complained of were instituted under this statute in January 1929. One Bilbrey, an attorney representing the company, filed with the insurance commissioner of the state an affidavit charging that Page had collected from policyholders of the company premiums amounting to approximately $1,000, which he had failed and refused upon demand to apply as directed by the policyholders by whom same had been paid. At the request of the company the insurance commissioner filed this affidavit with the Corporation Commission, and asked that rule issue directing Page to show cause why his licenses as agent should not be revoked. Page was licensed as agent for six other insurance companies as well as for plaintiff; and the rule as issued required that he show cause why all of these licenses should not be revoked. The rule was issued on February 19, 1929, and on April 9, 1929 a hearing was had, and the rule was dismissed on the ground that the evidence offered did not sustain the charge.

The evidence bearing upon the issue of probable cause for the institution of this proceeding, briefly stated, was as follows: Page had been representing some of the various departments of the company at Norfolk, Va., since as early as 1922, soliciting the writing of bonds of various kinds. He collected the premiums charged for these bonds and remitted same to the company, deducting the commission allowed him. For some premiums he was required to remit on the 20th day of the month following the writing of the bond. On others he was allowed a period of ninety days to collect and make remittance. In May, 1928, Page had not accounted to the company for certain premiums on business done in 1927, and the company was writing him in regard to same. It appears that on June 7, 1928, the amount of the premiums for which he had not accounted was in excess of $1,000, of which amount more than $700 was on business written in 1927. About this time a controversy arose as to whether Page was entitled to commissions on bonds written by the company for the Mortgage Security Corporation and the city of Norfolk; and Page refused to pay over the premiums collected, unless the company would credit him with these commissions. On August 8th he wrote the agent of the company a letter, referring to the recommendation of its state manager that it request the revocation of his license for refusal to pay over premiums collected, and reiterating his position that he was entitled to commissions on the Mortgage Security Corporation and city of Norfolk business. In December, 1928, the attorney, Bilbrey, and an auditor of the company made demand on Page for the payment of the amount due the company, and the auditor, on going over the books of Page, found that he was due the company approximately $2,000. Page again refused to pay over the premiums collected, unless the company would give him credit for the disputed commissions. The company then wrote the attorney under date of December 24th directing that he make complaint to the state commissioner of insurance and ask him to cite Page to account under penalty of having his license revoked.

It appears that the company laid before its attorney all of its correspondence with Page and acquainted him fully with all the facts and circumstances. The attorney then advised the proceeding for revocation of his license, and on December 31, 1928, made affidavit as to Page having collected premiums which he had not remitted to the company. This affidavit was filed with the insurance commissioner by the company's state manager on January 10th. Following this, Page called on the insurance commissioner, explained his claim for the disputed commissions and stated that he was willing to pay the balance, if the company would allow him the amount disputed, and that he was willing to leave the matter in dispute to the arbitration of the commissioner. The commissioner communicated this proposal to the company, and the latter declined same with the statement that it preferred to go ahead with the proceedings which had been inaugurated. Upon suggestion from the commissioner that the affidavit filed was not sufficient as a basis for the proceedings, the attorney filed another affidavit under date of February 14th setting forth that Page had collected premiums which he had refused to apply. The commissioner then asked that the rule issue, and same was issued under date of February 19th.

On March 1, 1929, the company began an action in the court of law and chancery of Norfolk for the recovery of premiums collected by Page and not remitted amounting to $2,392.57. Page pleaded by way of recoupment that he was entitled to the commissions in dispute to which we have referred, and on the trial admitted that the premiums which he had collected and not accounted for amounted to $2,551.84. This action was tried before a jury on June 7, 1929, and a verdict was returned and judgment entered for the company in the sum of $876.48, which Page paid shortly thereafter. The amount of the verdict was for the amount of the premiums which Page admitted having collected, less the deductions to which he claimed to be entitled.

The controversy over the disputed commissions arose in the following manner: In 1928 the company established a branch office at Norfolk and withdrew from Page authority to write bonds except of certain limited classes. Prior to that time he had written bonds for the Mortgagee Security Corporation and the city of Norfolk of a class that he no longer had authority to write after the establishment of the branch office. In 1928 the Norfolk bond was renewed, and he claimed commissions on the renewal premiums on the ground that it was a continuation of business which he had obtained for the company. The Mortgage Security Corporation opened a branch office in Los Angeles in May, 1928, and desired a large bond from the company, which it obtained. Page claimed that he was entitled to commissions on the premium charged for this, because that corporation was a customer which he had previously obtained for the company, and also because he had conferred with the corporation regarding same, and had obtained permission from an official in the New York office to bind the risk. The company, however, refused to write the bond through Page, and wrote it through its Norfolk office.

The premiums which Page had collected for the company and for which he had not remitted exceeded in amount the commissions which he claimed on account of the Norfolk & Mortgage Security Company bonds. In conversations with the attorney of the company, its auditor, its vice president, and the insurance commissioner, he offered to pay the difference, provided the company would allow him credit for the disputed commissions; but it is clear that the offer to pay was always coupled with this condition. On March 7th, the day on which the rule to show cause was returnable, he tendered the company a check for $653.85 on condition that it be accepted in full settlement;...