Pellet v. Manufacturers' & Merchants' Ins. Co. of Pittsburg

104 F. 502 | 7th Cir. | 1900

Lead Opinion

After the foregoing statement of facts,

GfROSSCOP, Circuit Judge,

delivered the opinion of the court, as follows:

The'contract of October 1st, 1897, in substance, provided for the establishment of a general agency for the promotion of the business of the defendant in error within the territory named; appointing to such agency the plaintiffs in error. On behalf of the general agents it was contracted that within the territory named they would supervise the business of the company; inspect the risks reported by the local agents; forward copies of all daily reports; be responsible for all premiums collected by local agents appointed by themselves; remit to the company the balances shown to be due to the company upon the monthly, statements; bear all expenses of supervision and inspection; all commissions to agents; all state, county, and city taxes, fees and charges; and all other expenses and charges, except such as relate to litigation.

Upon the part of the Company it is contracted that out of the business thus done by these general agents they shall retain, as compensation for their services, during the period of the contract, a commission of thirty-three and one-third per centum on the net groks business reported through their office, and a contingent commission of ten per centum of the net profits derived by the company from this general agency.

The life of the contract is fixed at three years from the 80th of September, 1897, providing however, for an earlier discontinuance upon the giving of a designated notice.

The Five Companies’ Contract of March 22nd, 1897, is, so far as the obligations between the companies and the agents are concerned, almost identical with the preceding contract, except that the commission is thirty-three per centum instead of thirty-three and one-third per centum,, and that its life is fixed at three years from the 1st of January, 1897, subject to termination upon designated notice.

The plaintiffs in error conducted a general insurance agency, and represented, in addition to the defendant in error, five or six other companies. It is not claimed that, upon the strength of the making and continuance of the contracts sued upon, they enlarged their office expenses, increased their clerical force or other equipment, or in any way injuriously assumed liabilities, or made preparations, that would not otherwise have existed. Nor is it claimed, as a matter of damages, that they were in possession of, or that there afterwards came to them applications for insurance, which, in the natural order of business, the defendant in error would have accepted, had there been no discontinuance of its business. The sole injury claimed is the loss of commissions upon business, not yet in hand, but merely in expectancy, should' the company, throughout the remaining period of the contract, accept, as in the past, such applications as the general agency would bring to it.

Unless, therefore, the contracts, either expressly or by implication, bound the defendant in error, throughout the period of the contracts, to a continued acceptance of such business as the plaintiffs in error might bring, irrespective of its own judgment upon the pqlicy of diminishing or ceasing altogether such business, there exists no promise upon which the action can be predicated. The existence, in substance, of such a promise, within either the language or the implications of the agreements, lies at the basis of the right of the plaintiffs in error to complain. Can we find'in the agreements, or reasonably read into them, any. such promise?

A negative answer to this inquiry does not require us to hold that the defendant in error could, without suable injury to the plaintiffs in error, dismiss, before the termination of the contract, and without cause, the latter as their general agents, while continuing, through other agents, to accept business in the territory named. There may reasonably be an implication in the agreements that, throughout the period named, the plaintiffs in error shall continue as general agents, if the defendant in error continues within that territory to accept business. But an implied promise of that kind is substantially different from the supposed promise that lies at the basis of this action.

.Nor is it necessary for us to hold, in answering negatively the inquiry stated, that for outlays made, and losses of commission on account of applications already obtained, in reliance upon a continuation of the relation to the end of the time stipulated, the plaintiffs in error would have no right to recover. An action for such iujuries is not dependent upon the supposed promise under discussion.

We, recur, then, to the inquiry, Did the agreements bind the defendant in error, irrespective of its own judgment subsequently formed respecting the character, volume, or eon l:i nuance of its business, to accept, throughout the period named, all such business as the plaintiffs in error might bring? Did the company abdicate to the general agents, except at the cost of a sum equal to one-third of its gross income from the territory named, the prerogative of determining what should he the scope of the company’s business within the given territory?

The prerogative is an important one. It might well happen that, out of some consideration relating to its own policy, the company might choose to materially abridge its business within, or withdraw altogether from, the territory named. The laws of a state may become burdensome; the character of risk in a given district may change; a wise adjustment of its affairs may require a change of field of operations, or an entire liquidation of its business. Was it contemplated, in the execution of these agreements, that the judgment of the company upon these questions should be surrendered to the interests of the agents; at least that it could not act upon such judgment without continuing to compensate the agents, as if no suc.h action had been taken? We think the agreements will hear no such interpretation.

The plaintiffs in error were, in substance, insurance brokers to the company. Their place was that of the middle-man; their office to procure for the company such risks as it was in the habit of accepting; their measure of compensation a percentage of the business done. The company bound itself to this measure of percentage, but did not bind itself that the volume of business done should be unchanged. There is nothing in the contract that shows that this vital power — (die power of determining for itself the scope of its own business — is transferred from the discretion of the responsible owner, to the discretion of the brokers. An interpretation so far reaching can only rest on unmistakable expressions or implications to that end.

The language of the agreements does not justify such an interpretation. It is true that it is provided that the contract shall continue for the term of three years, subject to annulment by either party upon giving to the other three months’ written notice; but, at most, this would sustain an action only for outlays made in reliance upon a continuance of the contract, or for commissions upon specific business already initiated; or possibly for commissions upon the business done within the territory through other agents than the plaintiffs in error after a causeless dismissal of the plaintiffs in error. The clause in question binds the company to a continuance of the relationship of principal and broker, and possibly to a recognition of the plaintiffs in error as the company’s sole brokers, but there is no clause that wrests from the company the sole power to determine what shall be the extent of its business through these brokers in the given territory. The contract is searched in vain for the expression of any such understanding, or an implication to that effect.

A clearer conception of the cogency of this conclusion may be obtained by a look into similar relations in the other fields where brokers are employed. A broker employed exclusively to sell upon commission real estate, grain or live stock, through a given period, may insist that, if within that period sales are made through another agency, his commissions shall be paid notwithstanding. His right, in that respect, is founded upon the implied promise that he shall receive commissions upon all sales made. But if the owner of the real estate, grain or live stock chooses, in the exercise of his judgment, to retain his property, and make no sales, the broker may not recover according to the measure of his mere expectancy; for there is no implied contract that the owner shall be deprived of the right to determine when he shall sell, or how much he shall sell, or whether he shall sell at all.

We find nothing in the agreements under consideration that puts the defendant in error in any different relation to its brokers. It is bound, possibly, to them, to transact through them whatever business it may do within the territory named, and to pay them therefor the stipulated commission upon the business done; if so, it is bound, likewise, to observe these obligations through the period provided. But it is not bound, any more than is the owner of the real estate in the illustration given, to make good to the brokers what may have been their mere expectations of the business to be done. It has not made the agents its master in the control of matters that may go to the very heart of its affairs.

We are not aided in the case under consideration by Morris v. Taliaferro, 75 Ill. App. 182, and the line of cases of which it is an illustration, in which it is held that one employed by another for a given period at a given salary, and discharged before the period expires, has a right of action for the stipulated salary, or so much of it, at least, as he was not able to earn in other employment. Such cases proceed upon the existence of an express promise to pay a given sum of money upon the performance of a given service.

Nor are we aided by Furnace Co. v. Magill, 108 Ill. 656, a case in which the plaintiff agreed that he would carry during the season of 1873 from Eseanaba to St. Joseph, in Michigan, for two dollars per ton seven thousand tons of ore, and from Marquette to St. Joseph for three dollars and a quarter per ton three thousand tons of 'ore ‘‘freight to be due and payable upon delivery of each cargo at St. Joseph.” Upon the defendants’ failure to furnish the ore as cargoes, though the plaintiff was ready and willing to carry them, an action for damages was brought. The court found that the transaction embodied a promise upon the part of the defendants to pay freight during that season between the points named on ten thousand tons of ore, and that the defendants’ failure to pay such sum gave the plaintiff the basis for a cause of action. As in the line of (‘ases just before referred to, there lies at the basis of this case the existence of a promise accurately measuring the extent of the defaulting party’s obligation. It is the absence of just this element —a promise commensurate with the theory upon which the plaintiffs in error compute their damages — that makes the case under consideration one that can not be maintained.

In coming to this conclusion we have considered carefully Lewis v. Insurance Co., 61 Mo. 534, and to the extent that that case involves the question here discussed are constrained to disapprove of it. We prefer to follow In re English & Scottish Marine Ins. Co., 5 Ch. App. 737, on appeal from the Master of Rolls, in which an insurance company, having a contract with its agent similar to the one under discussion, voluntarily ceased to do business before the contract expired. A claim for the commissions having been included in an action for damages the court disallowed it, speaking through James, L. J., as follows:

“I am of the opinion that this was a contract which dirt not give the seiw-ant the right to determine what the extent of the business was t,o be. He could not call upon (he directors to issue new policies or to take new risks if they were not minded, to do it. He could not say, ‘Such a person has brought in a policy of us and you must accept it,’ because if he had a right to say, 'You must carry on business.’ he would also have a right (o say, ‘You must carry on business in the usual and proper manner,’ and that would be giving (he servant the right of controlling the master in the maimer in which he chose to carry on the business. Now 1 am quite satisfied that the meaning of this contract was nothing of the kind. It was never intended to give the servant the right of dictating as to the extent of the business, be it more or less or nothing, but he simply took the chances of the company finding it a profitable business and carrying it on.”

Our conclusion resju’eting this question, going as it does to tlie whole claim made by the plaintiffs in error in the Circuit Court, dispenses with the need of disposing of the other questions presented. We hold that, upon the proofs submitted in the Circuit Court, no ease for the plaintiffs in error was made out, and that, therefore, there was no error in the court’s instruction for a verdict for the defendant in error.

The judgment of the Circuit Court is affirmed.

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Concurrence Opinion

SEAMAN, District Judge.

I concur in the decision to affirm the judgment rendered below in favor of (lie defendant, but am of opinion that other substantial grounds are presented on which it may rest,. without determining the close question whether breach of the contract in suit can be predicated alone upon the fact of the transfer of the entire business of the defendant company to the Fidelity Fire Insurance Company, and the notice thereupon given to the plaintiffs. The action was brought and all the testimony was introduced on behalf of the plaintiffs upon the theory that they were entitled to recover for the alleged breach, prima facie at least, a rate of compensation for their assumed earnings under the contract, during the remaining portions of its term, measured exclusively by the showing of income derived thereunder in the preceding years. Such view is clearly untenable under the authorities, but counsel for the plaintiffs insists that other evidence was produced tending to show the probability of a like amount of business in the future, on which they were entitled to go to the jury. It is a sufficient answer to this contention that no substantial evidence appears in the record to furnish even semblance of support for it. On the other hand, the case on the part of the plaintiffs disclosed at least two obstacles to any prima facie value of the showing thus made for measuring the damages, even on the assumption that the proofs were otherwise sufficient, namely: (1) Evidence of general expenses of the plaintiffs in conducting their agencies, aggregating about $30,000 per annum, no part of which was included in their showing of earnings under the contract in suit, nor was any proof furnished to show the pro rata share which was applicable to the business transacted thereunder; (2) evidence that another insurance company was secured by them in the place of the defendant, before and in anticipation of the alleged breach, without proof either tending to show that the substituted company was not of equal value to the agency, or loss in any respect through the change. However the general rule may be as to the onus of proof for mitigating the damages, it seems clear that the plaintiffs must make the full disclosure when the fact of mitigation appears on their own side of the case, and the proof of its extent is wholly within their knowledge. Unexplained, either of these conceded facts is destructive of any presumptive value in their testimony of the amount of commissions derived under the contract prior to the breach.

Failing evidence to authorize a verdict for substantial damages, the question would remain to be considered whether the plaintiffs were nevertheless entitled to a judgment for nominal damages, — a question which arises only because the action came to the court below through removal from the state court, and thus may affect- the allowance of costs. Section 968, Rev. St. This technical rule is not applicable unless the evidence on the part of the plaintiffs establishes a breach of the contract, and if the issue depended alone upon a construction of the contract, as held in the prevailing opinion, any doubt upon that point might well be resolved in favor of the judgment. But I am satisfied that other grounds of objection to the right of action are presented, which are at least equally sufficient, namely: (1) That suit was commenced while performance under the contract was continuing on the part of the plaintiffs, and under which they accepted benefits thereafter; (2) that the plaintiffs practically abandoned the contract by accepting inconsistent obligations before the alleged act of abandonment on the part of the defendant, and when performance by the latter was neither refused nor made impossible; and, on the case as a whole, (3) that the undisputed circumstances show the action to he prematurely brought, as well as without substantial merit. Therefore the judgment is rightly affirmed.

WOODS, Circuit Judge, concurs in the result.