Smathers v. Bankers' Life Ins. Co. Supreme Court Of North Carolina

• Decision Date: 06 October 1909
• Citation: 65 S.E. 746,151 N.C. 98
• Court: North Carolina Supreme Court
• Parties: SMATHERS. v. BANKERS' LIFE INS. CO. Supreme Court of North Carolina.

65 S.E. 746

151 N.C. 98

SMATHERS.

v.BANKERS' LIFE INS. CO. Supreme Court of North Carolina.

Supreme Court of North Carolina.

Oct. 6, 1909.

BANKERS' LIFE INS. CO.

1. Insurance (§ 138^*)—Special Agency Contract—Discrimination.

A special agency contract executed by an insurance company to induce the writing of a life policy creating insured a member of a select body of policy holders within the state, not to exceed 300 in number, and agreeing to confer to them a property right in the funds of the company by means of which the annual premiums were to be reduced to such an extent, that in five or six years the policy would becomeself-sustaining merely in consideration of insured paying the premiums on the policy and sending to insurer annually, at its request, the names of 10 residents of his county whom he deems insurable, constituted an illegal discrimination in violation of Revisal 1908, § 4775, prohibiting insurance companies from discriminating against individual insurants of the same class in the granting of special favors as to dividends or other benefits.

[Ed. Note.—For other cases, see Insurance, Dec. Dig. § 138.*]

2. Contracts (§ 138*)—Invalidity—Enforcement.

Where a contract was illegal in the sense that it was in violation of special statute, it was not enforceable so far as it was executory; both parties being in pari delicto.

[Ed. Note.—For other cases, see Contracts, Cent. Dig. §§ 681-700; Dec. Dig. § 138.*]

3. Insurance (§ 138*) — Discrimination — Statutes—Construction.

Revisal 1908, § 4775, prohibiting discrimination between life insurants, though enacted for the protection of policy holders, included within such protection, the general body of policy holders who would suffer by the enforcement of special agency contracts under which a particular class is afforded special benefits, and not those who have entered into such forbidden agreements, and are receiving profits thereby.

[Ed. Note.—For other cases, see Insurance, Dec. Dig. § 138.*]

Appeal from Superior Court of Buncombe County; Ferguson, Judge.

Action by John W. Smathers against the Bankers' Life Insurance Company. From an order overruling a demurrer to the complaint, defendant appeals. Reversed.

The complaint, in substance, alleged that plaintiff had heretofore had a policy of life insurance in defendant company to the amount of $5,000, and had paid the annual premium thereon for four years from 1903 to 1906, inclusive, at the sum of $131.50 per year; that the insurance policy was taken by reason of a contract entered into between plaintiff and defendant, separately drawn and evidenced, constituting plaintiff a member of the "Board of Advisory Agents" of defendant company for the state of North Carolina, not to exceed 300 in number, and under the terms of which plaintiff, as such member, was to have a continuing share of the "renewal commissions upon all the business done by the company in said state, which share would increase from year to year until at the end of five or six years the plaintiff's profits under said contract would fully pay the annual premiums upon said policy of insurance so that by reason of the benefits to accrue to plaintiff under said renewal commission contract the plaintiff's said policy of insurance would after the expiration of said five or six years become self sustaining"; that a scheme or plan was contained in the contract by which the interest of plaintiff in this renewal commission fund was to be declared and evidenced, and from time to time, in accord ance with such plan, certain certificates were issued to plaintiff in evidence of his interest in said commission fund tinder the contract. These certificates were similar in form, one of them being in words and figures as follows: "Bankers' Life Insurance Company of the City of New York. This is to certify that John W. Smathers, a member of the company's board of advisory agents of the state of North Carolina, having caused the company to receive regular premiums on an additional amount of insurance in accordance with the provisions of this contract, shall be, at each distribution, entitled to six additional units of representation, provided that the conditions upon which said additional units were credited, and the conditions of his said contract remain fulfilled. New York, N. Y., October 17, 1904. Frank G. Combes, Secretary. Form 736, 1-Pa., S. & N. C, 1-01-04." This contract is set out in full as a part of the complaint, and a portion of the same as indicative of its general plan and purpose is as follows:

"Whereas, the Bankers' Life Insurance Company of the city of New York has the good will and favorable influence of the leading bankers and business men in and around said city; and, whereas, to extend the benefits and advantages of the company and to further increase its business it agrees to appoint throughout the state of North Carolina a board of advisory agents to be composed of well-known citizens, agents of the company, whose good will and favorable influence shall be a considerable factor in sustaining the present high standing of the company: Now, therefore, in consideration of the foregoing and of the continued favorable influence, good will and assistance in building up the company, of the holder of this certificate, the company agrees to the following articles:

"Article I. To compensate the person herein named for his services, the company agrees to create from its expense appropriation a special renewal commission fund each year during a succeeding thirty years, based on the number of thousands of dollars of insurance which the company shall have in force in said state, on the 31st day of December of each year, and which was issued during the ten years between November 15, 1898, and November 14, 1908, both inclusive, and upon which premium payments have not ceased.

"Art. II. The company agrees to appoint not to exceed three hundred members of said board, and in the event of any such member forfeiting his membership therein, his place will not be filled, but the number of persons who shall thereafter be considered as members of said board shall thereby and to that extent be forever decreased.

"Art. III. On December 31st, 1899, and: annually thereafter during the period of thirty years mentioned above, the company shall determine the number of thousands of dollars of such insurance then in force, as provided in article I; also the number of members than remaining in said board; and each member shall at all times be entitled to representation on said board in each distribution of funds in the proportion of twenty units to each ten thousand dollars of insurance (and proportionately for other amounts) upon which he has caused the company to receive the regular premims, and for which he holds a certificate."

As to obligations imposed upon plaintiff the contract provides:

"Art. V. This Agents' Renewal Commission Contract is issued and will remain in force upon the two following conditions, which are hereby agreed to by the holder hereof: (1) That the person herein named shall annually furnish to the company upon its request, the names of ten people, residents of his county whom he deems insurable. (2) That he shall cause the company to receive annually the regular premiums on an amount of insurance aggregating at least five thousand dollars."

The complaint then alleged performance on part of plaintiff of all obligations imposed upon him by the contract until prevented by breach thereof on part of defendant in 190—, when defendant company withdrew from the state and ceased to write insurance therein, and failed and refused to create from its expense appropriation the special renewal commission fund, as provided by article I; and further:

"(8) That, except for the representations and inducements held out to the plaintiff as alleged in the third paragraph hereof, the plaintiff would not have taken out said insurance with the defendant, and the breach of said contract by the defendant as hereinbefore alleged made it necessary for the plaintiff to surrender and cancel said policy of insurance after he had paid four annual premiums upon said policy. The plaintiff's premium payments upon said policy were as follows: June 20, 1903, $131.50; June 21, 1904, $131.50; June 20, 1905, $l31.50; June 20, 1906. $131.50—and the plaintiff received from the defendant upon the surrender and cancellation of said policy the sum of one hundred and eight dollars ($108) or thereabouts.

"(9) That, by reason of the matters and things hereinbefore alleged, the plaintiff has been greatly endamaged, both generally and specifically, to wit, in the sum of two thousand dollars ($2,000) as nearly as plaintiff can ascertain the same. Wherefore the plaintiff prays judgment against the defendant (1) for damages in the sum of $2,000; (2) for costs; and (3) for such other further and general relief as the plaintiff may be entitled to...