Otto v. Imperial Casualty and Indemnity Company

• Decision Date: 11 May 1960
• Docket Number: No. 16329.,16329.
• Citation: 277 F.2d 889
• Parties: Ingolf H. E. OTTO, Appellant, v. IMPERIAL CASUALTY AND INDEMNITY COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

277 F.2d 889 (1960)

Ingolf H. E. OTTO, Appellant, v. IMPERIAL CASUALTY AND INDEMNITY COMPANY, Appellee.

No. 16329.

United States Court of Appeals Eighth Circuit.

May 11, 1960.

Elwyn L. Cady, Jr., Kansas City, Mo., made argument for appellant.

William H. Sanders, Kansas City, Mo., made argument for appellee.

Before GARDNER, VOGEL and VAN OOSTERHOUT, Circuit Judges.

VOGEL, Circuit Judge.

In this diversity action plaintiff-appellant seeks to recover from defendant-appellee compensatory and punitive damages for interference with an insurance agency contract which existed between the parties for a period of approximately six months. The parties will be designated as they were in the District Court. Plaintiff's complaint alleged that he was appointed an agent for defendant insurance company on July 22, 1957; that at that time he disclosed to defendant that the bulk of insurance to be written with defendant would be private passenger car insurance emanating from a single source, to-wit, the insurance counter at the G.E.M. Store in Kansas City, Missouri, which was to be operated by Mr. Milton Gordon; that defendant, "* * * in violation of the principles of the American Agency System, entered into a plan to purloin the `block of business' generated by Plaintiff" and pursuant thereto, on March 1, 1958, terminated his agency, "noting a spurious reason therefor", and immediately thereafter appointed Milton Gordon as agent; that plaintiff as a result thereof "* * * has sustained irreparable damage to his past, present, and prospective economic advantage in regard to his property interest in the `block of business' generated by him"; and that defendant's conduct was malicious, willful and "* * * executed with a knowledge of wrongfulness amounting to a wanton disregard of the rights of Plaintiff and the insurance-purchasing public of the United States." Plaintiff asked for compensatory damages in the sum of $18,000.00 and punitive damages of $54,000.00. Defendant moved to dismiss for failure to state a claim on which relief could be granted and to strike that portion of the complaint which sought punitive damages. Plaintiff's suggestions in opposition to the motion to dismiss disclosed that a written contract governed the relationship between the parties, which contract provided that the agency could be terminated by either party at any time and which contained the following additional provision:

"(6) In the event of termination of this Agreement, the Agent having promptly accounted for and paid over premiums for which he may be liable, the Agent\'s records, use and control of expirations shall remain the property of the Agent and be left in his undisputed possession; otherwise the records, use and control of expirations shall be vested in the Company."

The trial court denied defendant's motion to dismiss but granted the motion to strike, stating that:

"Although the plaintiff\'s allegations sound in delicto, they nevertheless present a question of contractual rights, and therefore, he is precluded from recovering punitive damages."

Defendant then answered, affirmatively alleging that plaintiff directed defendant to appoint Gordon its agent, and that "* * * if plaintiff had the right to any expirations or results of Gordon's business, all of which is denied, then plaintiff waived and gave up the same in inducing defendant to appoint Gordon as an agent."

The case proceeded to trial before a jury. At the outset plaintiff attempted, through an expert witness, to establish the custom and practice governing the relationship between an insurance company and its independent general agents under the American Agency System. The trial court properly sustained defendant's objection thereto on the grounds that the relationship of the parties here was solely defined by the written contract between them. Kalberg v. Gilpin Co., Mo.App. St. Louis 1955, 279 S.W.2d 177, 181; State ex rel. Chicago, M. & St. P. Ry. Co. v. Public Service Commission, 1916, 269 Mo. 63, 189 S.W. 377, 379. Thereupon, plaintiff offered to prove:

"* * * that the principle of this custom, trade practice, professional usage is that the agent shall have full and exclusive ownership of business which he generates."

The court correctly sustained defendant's objection to the offer of proof. It might be pointed out, however, that this ruling, of which complaint is made here, is immaterial inasmuch as the written contract provided for exactly what the plaintiff attempted to establish, i. e., the expirations were to remain the property of the agent. In its ruling, the trial court explained:

"This contract, as heretofore quoted, that is, paragraph 6 of the contract, provides definitely what is to be done upon the termination of the contract. That is, at the expiration shall remain the property of the agent and be left in his undisputed possession.

"The contract also provides that the contract may be terminated at will. So, in the opinion of the Court, the only question for determination in this case, in view of the admitted statements of counsel that the contract was terminated * * * the only question is what rights the plaintiff has with respect to the control of expirations, what were expirations and that sort of thing. I think that is the only question for determination, * * * under the terms of this contract, and any other matters will be extraneous and will not be admitted by the Court under the term of `customs\' * * *."

Plaintiff thereupon attempted to prove the value of the Gordon business written by him. He established that the gross premiums during the entire period the contract was in force totalled approximately $10,000.00. Plaintiff's commission from defendant was twenty-five cents of each premium dollar, of which twenty cents went to Gordon. Out of the remaining five cents it was necessary for plaintiff to pay the expenses incurred in handling the business. He, however, failed to make any showing as to the amount of such expenses or the amount of his net profit. There was no basis upon which could be predicated an opinion of the agency's value. Plaintiff did attempt to establish, as a "rule of thumb" for valuing a "block of business", that the expirations of a going agency about to be sold are worth one and one-half to three times the gross annual premiums. This evidence was rejected by the trial court as speculative and conjectural, there being no basis therefor, and additionally because the value of the expirations of an agency to be sold differs from the worth of expirations of an agent who has just been discharged or who has lost his agency contract.

Plaintiff called as a witness one Merlyn B. Martin, a former employee of defendant. He testified that after termination of the agency contract Gordon came to see him and suggested that he, Gordon, be appointed defendant's agent. Martin told him that he would first have to contact the plaintiff's agency and ascertain their views on such an appointment. Martin then talked with plaintiff's assistant, Harold Stern, plaintiff being out of town. Stern informed Martin that "he was quite sure it would be O.K. In fact, he told me that it hadn't been a profitable operation for them and suggested that I proceed to set up Gordon as an agent." Martin then discussed the matter of renewals with Marcellus Longan, plaintiff's office manager, who, in turn, "* * * produced her list of expirations and gave me a list of eight or ten, and asked me to handle those direct with Gordon, and on the renewals to bill his agency direct because she said that — reverting back to this five percent commission that they had retained, it wasn't profitable for their office and the sooner we could work direct with Gordon, the better her office would be. In other words, the better she would like it."

Plaintiff, himself, testified that after the defendant cancelled the contract none of Gordon's policyholders asked him to renew their policies, nor did any of them talk to him about their policies, nor did he attempt to contact them. Moreover, he explained that he never intended to approach the policyholders because "it was Mr. Gordon's business that was purloined from me, not that of the individual policyholders", and "Because approaching the individual policyholders and attempting to secure their business direct for myself, and that is cutting out Milton Gordon who did all the work or a large part of the work in securing that business in the first place, would be considered highly unethical and improper, and perhaps even illegal." Plaintiff admitted that after termination of the contract he received from the defendant a number of letters of which the following was typical:

"Re: May Renewals

"Gentlemen:

"We are enclosing a list of your renewals that would be due with this company for the month of May.

"However, inasmuch as your agency contract with this company has been terminated it will not be possible for us to renew these policies for you. We, therefore, assume that you will place them with one of your other carriers."

Milton Gordon was called by the plaintiff and testified only to the fact that he became an agent of the defendant sometime in March, 1958, and that he had contacted Martin, defendant's representative, for this purpose.

At the close of plaintiff's evidence, the trial court sustained the defendant's motion for a directed verdict on the grounds that plaintiff had failed to establish any theory upon which recovery could be had and, additionally, had failed to prove damages.

On this appeal we first consider the court's alleged error in striking plaintiff's prayer for punitive damages. Plaintiff contends that his complaint sounded in tort, and not in contract, and that under the law of Missouri he is entitled to recover punitive as well as compensatory damages. In so doing, he relies principally upon a case from this court, Peitzman v. City of Illmo, 8 Cir., 1944, 141 F.2d 956, certiorari denied 323 U.S. 718, 65 S.Ct. 47...