National Union Life Ins. Co. v. Ingram

• Decision Date: 13 June 1963
• Docket Number: 6 Div. 735
• Citation: 275 Ala. 310,154 So.2d 666
• Parties: NATIONAL UNION LIFE INSURANCE COMPANY v. F. R. INGRAM.
• Court: Alabama Supreme Court

Page 666

154 So.2d 666

275 Ala. 310

NATIONAL UNION LIFE INSURANCE COMPANY v. F. R. INGRAM.

6 Div. 735.

Supreme Court of Alabama.

June 13, 1963.

R. Macey Taylor, Birmingham, and Henry Heller, Montgomery, for appellant.

Kingman C. Shelburne and F. R. Ingram, Birmingham, for appellee.

LAWSON, Justice.

Service Life and Health Insurance Company and F. R. Ingram entered into a contract on June 15, 1954, wherein Ingram as 'General Agent' agreed to perform certain managerial duties for Service Life. In consideration for the performance of those duties Service Life agreed to pay to Ingram ten per cent of the gross receipts of Service Life each month thereafter for twenty years beginning on January 1, 1954, and ending on December 1, 1973. The contract provided, among other things, that the commissions therein provided for should be a first lien on the gross receipts of Service Life.

On November 1, 1954, National Union Life Insurance Company purchased all of the business of Service Life and on the same day purchased Ingram's general Agent's contract with Service Life in order that it could be cancelled and annulled. The contract between Ingram and National Union wherein Ingram transferred, sold, assigned and conveyed unto National Union all of his right, title and interest in and to his General Agent's contract with Service Life, provided:

'1. National Union Life Insurance Company shall pay to F. R. Ingram on the first day of each month hereafter for so long as said F. R. Ingram shall live, but in any event for a period of eight years from the date hereof, one per-centum (1%) of the gross monthly premium income realized by National Union from all hospitalization, surgery and medical insurance policies, commonly referred to as 'Hospitalization Business' in force in the State of Alabama, up to $100,000 per month gross premium income but not less than $200 per month, one-half of 1% on the next $100,000 of gross premium income in the State of Alabama, and one-fourth of 1% on the gross premium income in said State in excess of $200,000 per month, not to exceed $2,500.00 per month in accordance with the attached schedule.

'2. Said commission shall be paid by National Union to said Ingram on the first day of each month hereafter beginning December 1, 1954.

'3. Should Ingram die prior to October 31, 1962 (eight years from the date hereof) the remaining payments due from the date of his death to October 31, 1962, shall be paid to Ingram's heirs, personal representative, or assigns.

'4. The commissions herein provided for shall be a lien upon the gross permium receipts of National Union realized from Hospital business in the State of Alabama each month hereafter during the term of this agreement.

'5. This agreement shall be fully assignable but no assignment hereof shall be binding on National Union until thirty days after written notice of assignment by registered mail has been received by National Union.

'6. Payments of commissions hereunder, at all times hereafter during the lifetime of said Ingram, or until October 1, 1962, in any event shall be not less than $200 per month and shall not exceed $2,500 per month.

'7. This agreement shall enure to the benefit of the parties hereto, and to their respective heirs personal representatives, successors or assigns.'

On June 7, 1955, National Union paid Ingram the sum of $1,000 under the contract of November 1, 1954, and made another payment of $2,500 on October 1, 1955.

National Union made no further payments to Ingram under the contract of November 1, 1954, prior to the time it sold all of its Alabama 'Hospitalization Business' to United Security Life Insurance Company in January of 1957.

Neither National Union nor United Security would thereafter make any payments to Ingram under the said contract. Hence Ingram on January 30, 1959, instituted this suit against National Union and United Security claiming damages for breach of the contract of November 1, 1954. The complaint was amended several times. By one of the amendments United Security was eliminated as a party defendant. The remaining defendant, National Union, filed a number of pleas to which Ingram filed replications.

The case came on for trial before the court without a jury. A judgment was rendered in favor of Ingram in the amount of $9,438. National Union filed a motion for new trial, which was overruled. National Union has appealed to this court.

The record is voluminous, complex and confusing.

Shortly after United Security purchased the 'Hospitalization Business' from National Union, Ingram advised United Security that he claimed an interest in that business by virtue of his contract of November 1, 1954, with National Union. At the time Ingram asserted this claim to United Security, that company still owed National Union approximately $5,000 on the purchase price of the 'Hospitalization Business.' United Security refused to make any payments to Ingram, but paid the amount still due on the purchase price into the Circuit Court of Jefferson County, in Equity, under an interpleader, naming Ingram and National Union as respondents. The trial of the interpleader action resulted in a decree to the effect that Ingram did not have a lien on the money interpleaded, which was ordered paid over to National Union.

National Union asserts that the decree in the interpleader action is res judicata of the suit at bar. We do not agree. The claim of Ingram to a lien on the money interpleaded was 'dismissed without prejudice.' The decree in the interpleader action did not undertake to adjudicate the rights of Ingram under his contract with National Union. The decree contains the following language:

'That the claim of Respondent, F. R. Ingram, as shown by the proof, is that of a creditor merely and would entitle said respondent to subject this fund to the satisfaction of his claim only as a result of appropriate legal proceedings on the law side of this Court.'

We hold that the decree in the interpleader action was no bar to the maintenance of the present suit. See Lang's Heirs v. Waring, 25 Ala. 625; Collins v. Smith, 155 Ala. 607, 46 So. 986; Ex parte Dunlap, 209 Ala. 453, 96 So. 441.

The appellant, National Union, insists that the contract of November 1, 1954, here sued upon, is like unto a contract for employment for life and is, therefore, unenforceable in that it is not supported by an independent valuable consideration and the persons who purported to act on behalf of National Union had no authority to bind it.

In regard to a contract for life employment, the majority rule seems to be that two elements must be shown to exist before such a contract can be held enforceable. First, it must appear that there was a consideration of substantial value, independent of any service to be performed, and in making that determination the courts inquire into the actual value of the consideration. Second, where the promisor is a corporation, in the absence of ratification or estoppel, it must appear that the individual or individuals who acted on behalf of the corporation had actual, as opposed to implied, authority to bind the corporation. Alabama Mills v. Smith, 237 Ala. 296, 186 So. 699; Chesapeake & Potomac Tel. Co. of Baltimore City v. Murray, 198 Md. 526, 84 A.2d 870; Heaman v. E. N. Rowell Co., 261 N.Y. 229, 185 N.E. 83; Carney v. New York Life Ins. Co., 19 A.D. 160, 45 N.Y.S. 1103, affirmed 162 N.Y. 453, 57 N.E. 78; Rennie v. Mut. Life Ins. Co. of N. Y., 1 Cir. 176 F. 202; Beers v. New York Life Ins. Co., 66 Hun, 75, 20 N.Y.S. 788, 49 N.Y.St.Rep. 182; Kolodney v. Kolodney Bros., Inc., 21 Conn.Supp. 308, 154 A.2d 531; Lewis v. Minnesota Mut. Life Ins. Co., 240 Iowa 1249, 37 N.W.2d 316; Horvath v. Sheridan-Wyoming Coal Co., 58 Wyo. 211, 131 P.2d 315; Plowman v. Indian Refining Co., D.C., 20 F.Supp. 1; 35 A.L.R. 1432; 135 A.L.R. 646.

The contract of November 1, 1954, is not a contract of employment. It does not contemplate that Ingram is to render any services to National Union.

But we will assume without deciding, for the purpose of a disposition of this case, in view of the insistences made by appellant, that the rules applicable to contracts for life employment have application to the contract here involved.

The consideration for the promise made by National Union was the surrender by Ingram of his contract with Service Life so that it could be cancelled, thereby eliminating any claim which Ingram might have against National Union as a result of his contract with Service Life.

National Union argues that the surrender of his Service Life contract by Ingram was not a consideration of substantial value for the contract between National Union and Ingram, in that the Service Life contract was void because Ingram, in effect, contracted therein with himself in that he executed the contract on his own behalf as an individual and on behalf of Service Life as its president without the approval of the board of directors of Service Life or its stockholders.

The general rule is that contracts executed on behalf of a corporation by an officer who is also the opposing party to the contract or whose interests in the contract are adverse to those of his corporation are not void but merely voidable at the instance of the corporation or its stockholders. O'Conner Mining & Mfg. Co. v. Coosa Furnace Co., 95 Ala. 614, 10 So. 290; Ingalls Iron Works v. Ingalls Foundation, 266 Ala. 656, 98 So.2d 30; Mobile Land Improvement Co. v. Gass, 142 Ala. 520, 39 So. 229; James Supply Co. v. Frost, 214 Ala. 226, 107 So. 57; Fletcher, Cyclopedia, Corporations, Permanent Ed., Vol. 3, §§ 922 and 924. The right of a creditor to impeach such a transaction depends upon its fraudulent character. James Supply Co. v. Frost, supra; O'Conner Mining & Mfg. Co. v. Coosa Furnace Co., supra; Force v. Age-Herald...