Inter-Southern Life Ins. v. Humphrey

84 So. 625 | Miss. | 1920

Holden. J„

delivered the opinion of the court.

This is a suit by bill in chancery for discovery and accounting’ of certain sums of money alleged to be due by appellant Life Insurance Company to the appellee Humphrey. A demurrer to the bill having been overruled, this appeal is taken to settle the principles of the case.

The appellant Life Insurance Company entered into a written contract with Forrester and Loggins by the' terms of which the Life Insurance Company appointed the said Forrester and Loggins as its agents and agreed to pay them a certain per cent, on all new business written, as well as seven and one-half per cent, commission on all renewal premiums on old policies for a certain number of years. The eleventh clause of this contract provides as follows:

“No assignment of commissions accruing hereunder shall be valid unless authorized in writing by the company in advance.”

Subsequently the Life Insurance Company became largely indebted to the said Forrester and Loggins for the said commissions earned and accruing on renewal premiums under the contract, and it appears that in the course of time the insurance company would become still further indebted to its said agents for accruing commissions.

The said Forrester and Loggins became indebted to the appellee, Humphrey, in the sum of nine thousand, five hundred dollars as evidenced by their promissory note, and in order to secure the payment of this note they assigned to Humphrey, as collateral security, certain notes and accounts, and all their claims and demands against the insurance company on account of renewal commissions accrued and thereafter to accrue under the contract between said Forrester and Loggins and the insurance company, and all commissions accrued or accruing thereafter finder or on account of said contract were to be paid to appellee, Humphrey. The assignment further provides:

- “In event we should fail to pay the aforesaid note at the end of sixty days on demand the said Mrs. Sallie J. Humphrey, or her legal representative (who is the appellee executor here) in person or by agent, shall have the right to sell all of the notes, accounts, claims, demands and property herein assigned and transferred to her, or any part thereof, at public auction at any time after five (5) days’ notice in writing of the time and place of such sale mailed to each of us addressed to Greenwood, Mississippi, and apply the proceeds of such sale to the payment of said note.”

The bill in substance sets up the facts stated above, alleges that the note is past due and unpaid, and asks that the insurance company be required to discover the full amount of commissions due by it to said Forrester and Loggins, and that an accounting be had to appellee of the amount of said commissions, and prays for general relief.

The principal ground of the demurrer is that the allegations of the bill, which sets out the contract between Forrester and Loggins, including the provision that “no assignment of commissions accruing hereunder shall be valid unless authorized in writing by the company in advance,” preclude a recovery by the assignee because the assignment was not authorized, and therefore was invalid.

The decisive point in the case therefore is whether or not the proceeds growing out of the contract between Forrester and Loggins and the insurance company may be validly assigned as collateral security when the contract between the debtor and the assignor expressly prohibits such assignment.

We think undoubtedly the assignment here was as collateral security. The assignee took no rights under the assignment other than to collect the renewal commissions and hold the same as collateral to secure the payment of the note. The assignment expressly' provides the manner of disposition of the collateral and the applica* tion of the proceeds to the payment of the note. The assignee did not become the real and unconditional owner, both legal and equitable, of the renewal commissions due under the agency contract. Forrester and Loggins had not disposed of their entire interest in the commissions by the assignment, but merely pledged the commissions as collateral security for the payment of the note; they retaining the legal ownership. When á sufficient amount of the commissions would have accrued and been applied to the payment of the note in full, then Forrester and Loggins, who were the legal owners at all times, would again resume drawing the balance of the commissions forthcoming for a number of years.

In our investigation of the question we find that the parties may in terms prohibit the assignment of any contract, and that such prohibition is valid and binding, but whether such assignment as collateral security, as contradistinguished from a complete, unconditional assignment of the full title, is invalid is an inquiry of considerable difficulty in the particular character of contract before us.

This court in Ætna Insurance Co. v. Smith, 117 Miss. 327, 78 So. 289, L. R. A. 1918D, 1158, has settled the principle in this state that a stipulation in an insurance poligv, providing that it shall be void if assigned without the consent of the company, contemplates a general or complete unconditional assignment of the ownership of the policy, and is not void where . the policy is assigned merely as collateral security for a debt and the real ownership remains in the insured. Of course the rule was applied there to an insurance policy, and it may be reasonably said that there is a difference in the two kinds of contract, but we think the same principle is involved in the contract here as in the insurance contract; and therefore we are constrained to hold that the stipulation against assignment in the case before us contemplated only a complete unconditional assignment of the ownership of the commissions, and did not contemplate and intend an assignment as collateral security. Consequently we have reached the conclusion that the assignment in this case was valid. 5 C. J. 952.

We have carefully perused the cases cited by counsel in support of their respective contentions, but have gained no real satisfaction from any of them. Some of the cases deal with the question of assignment of the nonassignable contract and the proceeds thereunder, and others involve the assignment of the proceeds, alone as between different assignees, while many of the decisions involve the rights of municipal debtors to assignees where the assignment seems to have been a complete unconditional transfer of the proceeds of the contract, and not an assignment or pledge as collateral 'to secure the payment of a debt. But nowhere have wc been able to find a case which expressly holds that the provision against assignment contemplated and intended to prohibit the assignment of the debt or chose in action as collateral security. On the contrary, we find the textbook rule to be that stipulations against assignments are not intended to prevent assignment as collateral. This seems to be an announcement of the general rule, which we have found applied in many cases involving land contracts, insurance policies, etc.,, and we see no reason against the application of the same principle in the case at bar. Butler v. Gage, 14 Colo. 125, 23 Pac. 462.

Prohibition in a contract against assignment is legal and valid. The right to make a personal contract or to agree for the performance of á contract by a certain party to the exclusion of all others is obviously legitimate. Such contracts are often made with a view! of retaining the personal interest and action of the payee, which purpose might be defeated should the contract or the fruits of it be unconditionally assigned to some stranger. But where the assignment of the proceeds in a nonassignable contract is made merely as collateral security for the payment of a debt, and the real ownership remains in the assignor, he still retains the personal interest and obligation of performance as the real owner, and the reason urged against the validity of such assignment disappears, and the rights of the debtor arc not prejudiced by the collateral assignment which inures to the benefit of the assignor.

Restrictions against assignment of' contracts are not looked upon by the courts with full favor, because they prohibit the alienation of such property rights, thus depriving the owner of the full enjoyment and control thereof; especially is this true when such deprivation results in no benefit to the debtor.

It is held by good authority that' the prohibition against assignment in a contract intends that the owner of the property right cannot voluntarily assign 'it, but that when the right passes to another by court sale or foreclosure against the right assigned as collateral security, it is valid, because the transfer of full title in such case is involuntary on the part of the owner in the contract. Crouse v. Michell, 130 Mich. 347, 90 N. W. 32, 79 Am. St. Rep. 479.

However, we rest the decision in this case upon the ground that there is a clear distinction between an unconditional assignment and a collateral assignment, and that the prohibition in the contract against assignment does not contemplate a collateral assignment, but means that only a complete assignment by the owner of his whole interest in the property right shall be invalid.

The decree of the lower court is affirmed, the cause remanded, and sixty days granted appellant in which to further plead.

Affirmed and remanded.