Security Trust & Life Insurance v. Ellsworth

KjgbwiN, J. 1. Tbe material facts are substantially undisputed, and tbe questions involved upon tbis appeal are mainly questions of law. Tbe appellants contend that the note, mortgage, and other papers referred to in tbe statement of facts were all contemporaneous agreements between tbe same parties and in relation to tbe same subject matter, therefore should be taken together and considered as one instrument for tbe purpose of determining tbe character of tbe transaction and the intention of tbe makers; that tbe provision in tbe contract delivered with tbe note and mortgage, that “the said note shall be considered as a call loan, but that no call for tbe payment of said loan or any part thereof shall be made at any time in excess of tbe renewal commissions accruing from time to time to tbe said party of tbe second part and Huber Hurd Ellsworth and any other parties who are or who may be associated with them or either of them in tbe management of said agency,” obligated tbe defendants' to payment only in such manner, and therefore there could be no default upon tbe note until such renewal commissions bad accrued and a call made therefor; that since no renewal commissions accrued and remained unpaid, there was no default and no right of foreclosure existed. On tbe other band, it is claimed that tbe promise to pay, in tbe note and mortgage, was absolute, and that tbe contemporaneous writing was — 358 — never executed by the parties to be charged, or upon whom the obligations which would give it mutuality were to rest; that by another contract between the parties the fund out of which payment was to be made had been diverted and applied to another purpose; and further, that by resigning their offices before any payment had been made on the indebtedness described in the note and mortgage the defendant Henry Ellsworth and his son voluntarily put it beyond their power to pay the debt in the manner contemplated in the writing, and thereby rendered themselves liable to pay it in the usual way. The writings were all delivered at the same time; they related to the same subject matter between the same parties; and upon well-established principles so far as they can stand together they must be considered as one instrument. Norton v. Kearney, 10 Wis. 443; Blakeslee v. Rossman, 43 Wis. 116; Severin v. Rueckerick, 62 Wis. 1, 21 N. W. 789; Herbst v. Lowe, 65 Wis. 316, 26 N. W. 751; Morgan v. Loomis, 78 Wis. 594, 48 N. W. 109; Hannig v. Mueller, 82 Wis. 235, 52 N. W. 98; Stapleton v. Brannan, 102 Wis. 26, 78 N. W. 181; 4 Am. & Eng. Ency. of Law (2d ed.) 144. It is insisted by counsel for respondent that the alleged contemporaneous writing dated December 28, 1903, and set out in the statement of facts was incomplete and not binding because not signed by Seaman .and Van Asmus, hence effect should not be given to it. But an examination of this instrument will show that it was not intended to be signed by Seaman and Yan Asmus; it was not an agreement to which they -were parties or intended so to be. It recites on its face that it is an agreement “between the Security Trust & Life Insurance Company, a corporation of the state of Pennsylvania, of the first part, and Henry Ellsworth, his administrators, executors or assigns, ... of the second part.” It is in no way incomplete, nor does it appear that it was intended to be signed by any other party. The provision in the body — 359 — of this agreement that Seaman and Van Asmns agree that all renewals accruing under the contract of January 6, 1903, and the new agency contract of December 28, 1903, shall be paid to the party of the first part in liquidation of the note and mortgage, in legal effect amounts to a promise upon the part of Ellsworth that all commissions accruing under these contracts shall be turned over according to the terms of the agreement. The contract is clearly and unequivocally one between plaintiff and Ilenry EUsworbh. The question respecting the language in the second clause as to other persons not parties to the contract agreeing is not one of incomplete execution, but of construction. It is quite obvious upon the face of the instrument itself that the intention of the second party was to obligate himself that the renewal commissions under these contracts should be applied at the call of the plaintiff in liquidation of the mortgage debt. It is further claimed that the agreement dated December 29, 1903, supersedes that of the 28th. It will be borne in mind, however, that both of these writings were executed and delivered at'the same time, and obviously were intended by the parties to take effect and be considered as one instrument. We are unable to see that the provisions in the writing dated December 29th are so repugnant to the instrument dated December 28th as to show that the parties intended one should supersede the other, as contended by respondent’s counsel. The provisions of these contracts may in some respects be cumulative, but not repugnant. The writing of the 28th is in effect, an agreement to turn over in liquidation of the mortgage indebtedness the commissions of all parties under the agency contracts of January 6 and December 28, 1903, while the contract of December 29th provides for the turning over of commissions in payment of advances to be made in 1904. Now, while both of these writings purport to transfer the commissions and were executed and delivered together, it is quite apparent that the intention of the parties was to turn — 360 — over all commissions in liquidation of both claims, obviously contemplating that there would be sufficient to pay the mortgage debt as well as the advances of 1904. Had the business been a success, as doubtless the parties anticipated, the commissions evidently would have in a short time paid the mortgage debt as well as all advances. The writings being capable of a construction which will suffer them to stand together, such construction must be given them. John O’Brien L. Co. v. Wilkinson, 117 Wis. 468, 94 N. W. 337; Knower v. Emerson, 9 Pick. 422; Sumner v. Williams, 8 Mass. 162; 2 Parsons, Contracts (9th ed.) 657; Bent v. Alexander, 15 Mo. App. 181, 189; Belch v. Miller, 32 Mo. App. 387, 396; Chicago W. & S. Co. v. Street, 54 Ill. App. 569. Although the note and mortgage bore date December 22d there is no dispute but that they were delivered and took effect on the 29th day of December, contemporaneously with the other contracts, and the evidence is undisputed that the writings were delivered with the consent of all parties, Seaman and Yan Asmus assenting to the contract of December 28th not signed by them, and which provided for the payment- of the mortgage indebtedness out of commissions. It further appears that -long after the execution and delivery of these writings and on or about July, 1904, a dispute arose between plaintiff and defendant Henry Ellsworth respecting the payment of interest upon the mortgage indebtedness, as to whether or not it should be paid out of commissions, at which time the general manager of the plaintiff, in a letter to defendant Henry Ellsworth, refers to the fact that the agreement makes no mention of interest, and says: “The agreement makes no mention of interest. It was and is merely a stipulation as to our right to ‘call’ the principal or any part of it, leaving the interest to be paid as provided ijor in the notes and mortgage.” The general counsel of plaintiff also in a letter to Henry Ellsworth in July, 1904, speaking of his consultation with — 361 — Mr. I/uper, general manager of plaintiff, respecting tbe matter, refers to tbe first paragraph of tbe agreement of December 28, 1903, and says that it does not apply to interest upon ■tbe loan, but to tbe principal only. So it seems tbe officers of tbe company understood at tbis time that tbe agreement was in force and that tbe mortgage indebtedness should be paid in tbe manner provided in tbe agreement. Upon tbe whole record we think tbe agreement was that tbe mortgage debt should be paid out of renewals only, and that no call could be made for any portion of such indebtedness in excess of tbe renewal commissions as specified in tbe agreement. 2. It is further contended by counsel for respondent that tbe withdrawal from tbe agency of Henry Ellsworth and bis son put it out of their power to pay tbe debt as provided in tbe contract, hence tbe debt became payable in tbe usual way. This involves tbe question of tbe right of tbe agent to resign, and whether or not, if such right existed, it was reasonably exercised. Both contracts of agency are silent as to tbe time they should remain in force, and both recognize tbe right of resignation by providing, “in case of tbe resignation or removal of tbe said agents, tbe said company may, and it is hereby authorized and empowered to, pay such subordinate agents any commissions or other remuneration which said agents shall have agreed to pay such subordinate agents and to offset against all claims under tbis contract such commissions or other remuneration so paid.” Tbe general rule is that, where there is no express or implied covenant to tbe contrary, tbe agent may resign at any time. Mecbem, Agency, § 233. It is claimed, however, by counsel for respondent that there was an implied covenant on tbe part of tbe agents that they should not resign, and it is insisted that tbis covenant arises not only out of tbe fact of tbe existence of tbe indebtedness and tbe obligation to pay it, but as well out of tbe agreement on tbe part of tbe debtor, implied in all such •cases, not to voluntarily put an end to tbe conditions upon — 362 — which his agreement is of value to the creditor. This branch of counsel’s contention, therefore, rests upon the assumption of implied covenant. Conceding for the sake of argument that the law would impose some obligation upon the agents not to unreasonably abandon their undertaking, still such rule must have a reasonable construction. If the law implied a covenant for the continuance of the agency, it would not extend beyond such time as was reasonably necessary to make an effort to successfully accomplish the purpose of the agency. Clearly, there was no -implied covenant that the agency should be continued indefinitely when the continuance of it proved fruitless. If it were otherwise, the agents might be compelled to indefinitely continue the agency without profit to themselves or their principal. The doctrine of implied covenants is in a sense an equitable doctrine, and is enforced upon the broad principle that the law implies a covenant in the agreement where it is clear that if the attention of the party had been called to it he would have exjnessly agreed. So it must follow that the agents here could not have intended to agree against resignation, or that they should be compelled to continue the agency for any particular ^ time beyond that reasonably necessary,to give the business a fair trial. Implied covenants exist where equity and justice require the party to do or refrain from doing, the thing in question. Genet v. D. & H. C. Co. 136 N. Y. 593, 32 N. E. 1018; Scrantom v. Booth, 29 Barb. 171, 174; Allamon v. Albany, 43 Barb. 33, 36; Booth v. Cleveland R. M. Co. 6 Hun, 591, 597; Dermott v. State, 99 N. Y. 101, 1 N. E. 242. It appears quite clearly from the evidence that the defendant Ilenry Ellsworth and his associates made a reasonable effort to successfully conduct and build up the business. No claim is made that they did not diligently and faithfully perform' their duties under the agency to the best of their ability. But it appears they were unable to make a success. — 363 — Tbis fact they commxmicatecl to tbe plaintiff. It is established by tbe evidence that tbe defendant Henry Ellsworth- and bis associates did not intend to be personally responsible for tbe advances made in building up tbe business of the-plaintiff, but that all such advances should be paid out of the-commissions accruing from tbe business. It will be borne in mind that tbe company in tbe new contract of agency delivered at tbe same time as tbe note and mortgage provided for large monthly advances for 1904 Tbe agents under tbe contract were expected to make a reasonable effort in the-performance of their duties in building up tbe business; beyond tbis they were not expected to go. It is said by counsel for respondent that at tbe close of tbe year 1908 there was. $11,000 which belonged to tbe company as its share of first annual premiums collected by defendant Henry Ellsworth and bis son on policies written by them. But it also appears that defendant paid $2,000 of tbis, and claimed that be was entitled to $15,000 on account of advances made by him in building up tbe business. So upon Ellsivorth’s theory at tbe time of tbe giving of tbe note and mortgage be was not indebted to tbe plaintiff in any amount, hence tbe recital in tbe contract of December 28th to tbe effect that it was necessary from time to time for the party of tbe second part to advance to bis agents considerable sums of money, and that tbe sums of money advanced up to date amounted to $15,000, and that tbe mortgage indebtedness should be considered a call loan,, and that no call should be made in excess of tbe renewal commissions accruing from time to time to tbe party of tbe second part and Huber Hurd Ellsworth and any other parties who-are or who may be associated with them or either of them in tbe management of said agency. Tbe authorities cited by respondent to tbe point that there was a breach of implied covenant we cannot see apply to the case before us. Here there was no implied covenant to con — 364 — tinue, for, as said in Genet v. D. & H. C. Co. 136 N. Y. 593, 609, 32 N. E. 1078: “A promise can be implied only where we may rightfully assume that it would have been made if attention had been drawn to it (Dermott v. State, 99 N. Y. 101, 1 N. E. 242), and that.it is to be raised only to enforce a manifest equity, or to reach a result-which the unequivocal acts of the parties indicate that they intended to effect. King v. Leighton, 100 N. Y. 386, 3 N. E. 594.” If we are correct in our conclusion that there was a right to resign and such right was lawfully exercised, then there was neither breach of covenant nor wrong in resigning, and hence the authorities cited by respondent’s counsel do not apply. It seems clear that the defendant here intended and contracted to pay only out of commissions to be earned. Under the terms of the contract if none were earned he would be under no obligation to pay in any other manner. Having the right to resign and exercising that right reasonably, the contract was terminated and his obligation to pay extinguished. The fruits of his labor, whatever they might be, for the period of time he acted as agent of the company in endeavoring to build up the business, passed to the company upon his resignation, as well as the renewal commissions on policies written by him, since the contract of agency provided that renewals should run during the life of the policies, and that the agent should receive commissions during the continuance of his agency and no longer. It is said that a debtor cannot voluntarily put an end to the conditions upon which his agreement is of value to the creditor. But this argument brings us back to the proposition of whether the defendant had a right under the contract to resign. If he had such right and exercised it lawfully, he was pursuing his rights under the contract and in accordance with it, and whether in so doing conditions valuable to the plaintiff were ended or not cannot affect the question. — 365 — If the right existed, the consequences flowing from the exercise of it must be borne by the plaintiff. But it cannot be said upon the record that the continuance of the agency would have been of value to the plaintiff, since if the business should not prove a success while managed by defendant, and plaintiff was obliged under the contract to advance large sums of money in carrying it on, its continuance might prove a damage and not a benefit to the plaintiff. The finding that the agents “refused and now refuse to further perform the agency contract” is wholly unsupported by the evidence. The proof is that the defendant Henry Ellsworth and Huber Hurd Ellsworth, long after they had notified the plaintiff that they could not make the business a success, and on the 11th day of October, 1904, tendered their resignation in writing to take effect on or before thirty days from the date thereof; that on October 14, 1904, the vice-president of the plaintiff replied by letter to said letter of resignation asking defendant Henry Ellsworth to receive premiums until such time as plaintiff might be able to get a new agent and get proper notice to the policy-holders. There is no evidence whatever in the record of any objection to the resignation, nOr that this resignation was wrongful or against the consent of the plaintiff. So far as the record shows it may have been in the interest of plaintiff. The agent having the right to resign, and there being no evidence to the contrary, we must presume that the right was lawfully exercised. We conclude, therefore, that the promise upon the part of the defendant Henry Ellsworth to pay the mortgage indebtedness was not an absolute promise, but a promise to pay in so far as there might be renewal commissions sufficient for that purpose; that there was no covenant either expressed or implied that the agent should not resign after having made reasonable effort to successfully manage the business and failed; that the right of the defendant Henry Ellsworth and his son to resign was reasonably and lawfully exercised, and — 366 — that by such resignation tbe defendant Ilenry Ellsworth became discharged from his obligation upon the mortgage indebtedness. By the Court. — The judgment of the court below is reversed, and the cause remanded with instructions to the court below to grant the relief prayed for in the defendant’s counterclaim.