Sec. Life & Annuity Co v. Costner

Decision Date02 December 1908
Citation63 S.E. 304,149 N.C. 293
CourtNorth Carolina Supreme Court
1. Contracts (§ 103*)—Validity.

No distinction between contracts malum in se and malum prohibitum is recognized in North Carolina.

[Ed. Note.—For other cases, see Contracts, Dec. Dig. § 103.*]

2. Contracts (§ 105*)—Validity—Violation of Statute.

No enforceable promise or obligation can grow out of a contract prohibited by statute.

[Ed. Note.—For other cases, see Contracts, Cent. Dig. $ 478; Dec. Dig. § 105.*]

3. Insurance (§ 187*) — Premiums — Contracts for Special Benefits—Effect on Premium Note.

Even if a contract by a life insurer giving a class of 600 of its policy holders, including defendant, special benefits, is void as violating Revisal 1905, § 4775, that does not defeat defendant's liability on a note for premiums at the same rate charged all persons of his age for that kind of policy; he having retained the policy.

[Ed. Note.—For other cases, see Insurance, Dec. Dig. § 187.*]

4. Insurance (| 187*) — Life Insurance — Premiums — Promise to Pay — Consideration.

That defendant's life was insured for a year shows a valid and valuable consideration for his promise to pay a premium.

[Ed. Note.—For other cases, see Insurance, Cent. Dig. $ 401; Dec. Dig. § 187.*]

5. Insurance (§ 1S7*) — Life Insurance — Premium Notes—Identity of Payee—Materiality.

That a life insurance premium note was payable to insurer's agent and was transferred to insurer is immaterial in insurer's suit on the note; insurer being bound by the agent's acts.

[Ed. Note.—For other cases, see Insurance, Dec. Dig. § 187.*]

Appeal from Superior Court, Lincoln County; Moore, Judge.

Action by the Security Life & Annuity Company against George H. Costner. From a judgment for plaintiff, defendant appeals. Affirmed.

Defendant executed his promissory note for $144.10 payable to A. E. Scarborough, being the amount of premium on three policies of insurance aggregating $5,000 issued by plaintiff company on the life of defendant. The note was transferred to plaintiff, before maturity, by Scarborough, who was its agent, for the purpose of soliciting insurance policies. Defendant admitted the execution of the note, and alleged, by way of defense, that at the time the policies were issued, and as an inducement to him to take them, plaintiff executed and delivered to him a contract in the following words: "The Security Life & Annuity Company, in consideration of his influence and good will in promoting and maintaining its business in the state of North Carolina, through its authorized agents, and by recommending to them suitable persons for insurance and aiding them to secure at least two applications, on which $5,000 contracts are issued by this company, employs George Henry Costner of Lincolnton, N. C, as one, not exceeding 600 persons, who shall receive as compensation for such services, a renewal commission according to the following terms and conditions, to wit: Said company agrees, at the end of each calendar year, it will credit the said George Henry Costner, with his pro rata share of a special renewal commission fund (to be created from the expense element of its premiums) according to the number of the said 600 persons whose contracts remain in force, said special renewal commission' fund to be made up of $— set aside annually for such purpose, for every contract in force, written in the state of North Carolina, for ten years from September 1, 1901, on which there has been paid during the preceding twelve months one annual, two semi-annual or four quarter-annual premiums and so long as such premiums are paid. On every anniversary of the date of this contract, after the second, the amount so credited as above to be deducted from the annual premium on said George Henry Costner's policy and any excess to be paid said George Henry Costner in cash, said compensation being for no other consideration than as mentioned above. In the event of lapse of the $5,000 contract on his own life, or failure to perform the services herein defined, this contract shall terminate." This contract was signed by plaintiff's president and delivered with the policy by Scarborough. Defendant testified that he was induced to take the insurance by reason of the execution of the contract, and that he ascertained, in a short time thereafter, that the contract was illegal. He retained the policies and refused to pay the note—has never paid any premiums on them. He contended that the contract was violative of the provisions of section 4775 of the Revisal of 1905 and invalidated the note given by him. He requested his honor to so instruct the jury, which was declined, and defendant excepted. The jury found that the contract was executed and delivered at the same time that the policies issued, and under instructions of the court found that defendant was indebted to plaintiff, etc. Judgment and appeal.

C. E. Childs, for appellant.

A. L. Quickell, for appellee.

CONNOR, J. (after stating the facts as above). The sole question presented is whether, by reason of the provisions of section 4775, Revisal 1905, forbidding insurance companies from giving any special benefits, or any rebate of premiums on policies to one person not given to all others of the "same class and expectation of life, " the entire contract, policy, and note are void. Conceding that the contract, set out in the record, violates the provisions of the statute, it does not follow that the policy of insurance issued, or the note given for premiums are void. It is not always easy to distinguish between those cases in which the illegal element enters into and so permeates the entire contract as to render it void, and those in which two covenants or obligations are assumed which are either severable or which the parties have so severed that the valid may be separated from the invalid and enforced. Pollock thus states the law: "A lawful promise, made for a lawful consideration, is not invalid by reason only of an unlawful promise being made at the same time and for the same consideration." Again: "Where a transaction partly valid and partly not is deliberately separated by the parties into two agreements, one expressing the valid and the other the invalid part, then a party called upon to perform his part of that agreement which is, on the face of it, invalid, cannot be heard to say that the transaction, as a whole, is unlawful and void." Contracts, 482, 483; Odessa Tramway Co. v. Mendell, L. J. 1878, 47 Ch. U. S. 505. In Price v. Green, 16 M. & W. (Exch.) 346, the defendant, for one consideration, covenanted not to engage in trade in the cities of London and Westminster, or within 600 miles of either of said cities. The action was for breach of the first covenant. Patterson, J., held that the two were divisible and sustained the action for breach of the valid covenant, saying: "No doubt, the covenant formed the consideration for the payment of £1, 500, and possibly Gosnell would not have given so large a sum, unless the prohibition to...

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