Alliance Mutual Casualty Co. v. Scheufler

The opinion of the court was delivered by

Hatcher, C.:

This appeal stems from a controversy over the rights of an agent, who had defaulted by failing to account to his insurance companies for premiums he had collected, to the agency’s expiration records.

The trial court’s findings of fact and conclusions of law were in-favor of the plaintiffs on all issues.

The defendant, C. F. Scheufler, became an insurance agent for each of the plaintiffs at Hoisington, Kansas, by contracts dated July 11, 1956, each of which contract provides insofar as material here:

*172“The Agent agrees that all premiums reveived by the Agent shall be held by him as trustee for the Company until delivered to it; and the privilege, if granted, of taking commissions from the premiums shall not be construed as changing the relationship of the respective parties hereto.
“In the event of the termination of this Agreement, the Agent not being in default and thereafter promptly accounting for and paying over balances not in default for which he may be liable, the agent’s record, use and control of expirations shall be deemed the property of the Agent and left in his undisputed possession; otherwise the records, use and control of expirations shall be vested in the Company.”

In 1961 and 1962, C. R. Scheufler became delinquent from time to time in the remitting of premiums to the plaintiffs and “stop orders,” which are directives to write no more insurance, were issued to him on December 17, 1961, April 17, 1962, June 5, 1962, and October 31,1962. Scheufler brought his accounts to date following the first three stop orders but failed to do so following the stop order issued October 31, 1962.

On November 16, 1962, Leonard Williams, field representative of plaintiffs, called at the Scheufler Agency in Hoisington concerning the past due accounts and was then given five checks by Mrs. Scheufler drawn upon the Peoples State Bank of Ellinwood, Kansas. This transaction will be given more detailed attention when the pertinent issue is considered.

On December 4, 1962, Leonard Williams went to the Scheufler Agency at Hoisington, Kansas. Mrs. Scheufler was there. He told her he was cancelling the agency and that written notices of cancellation would be sent. Mrs. Scheufler and he then removed from the Scheufler filing cabinets the dailies and expirations of the Alliance Companies. The manila folders with the names of the insured were left. He also picked up the insurance supplies of the Alliance Companies such as unwritten policies, rate books, endorsements and other supplies furnished by the companies. The work was finished on December 5, 1962.

R. E. Vohs, of Iola, Kansas, had previously inquired of the Alliance Companies about being appointed an Alliance Agent. He was called about taking over the Alliance business in Hoisington, Kansas, and came to McPherson, Kansas, the main offices of the ■companies, on the afternoon of December 4, 1962. After some ■discussion the Alliance Companies offered to sell him their expirations in the Scheufler Agency for $11,231.77, which actually repre*173sented about what the Alliance Companies thought that Scheufler owed them. The sum of $500.00 was paid down to each company and the balance of the purchase price was paid on December 31, 1962. Vohs took over the Alliance business shortly after December 10, 1962.

Vohs testified that Scheufler told him he had reconstructed the expiration records of the Alliance Company policy holders; that Scheufler was calling upon Alliance policy holders whose policies were expiring and that he was unable to hold many of the expirations. He did keep more than $3,000.00 worth of renewal business but he had to work to keep it. The Alliance Companies amended their sales contract to Vohs and paid him back $5,500.00 in May, 1963.

Final audits of the Scheufler accounts showed that Scheufler owed Alliance Mutual Casualty $10,885.97 and Farmers Alliance Mutual Insurance Company $1,642.56, but they announced that they were waiving their claim for the additional $109.09 due Alliance Mutual Casualty Company and the additional $497.55 due Farmers Alliance Mutual Insurance Company.

On December 10, 1962, a letter was mailed to C. R. Scheufler, by the vice-president of the Alliance Insurance Companies, cancelling the agency agreement. The letter will be given detailed attention later.

With these abbreviated facts before us we consider appellants’ suggested grounds for reversal.

The appellants contend that there was payment of appellants’ debt to the Alliance companies by the payment of Vohs in the purchase of the expirations and, also, the agency contract should be so interpreted that the debt would be considered paid when the companies elected to sell the expirations; the contract should be interpreted as requiring the companies to credit the appellants with any payments received for the expiration records; the Alliance companies had no right to sell the appellants’ expirations .except as agent for the Scheuflers and must account for the proceeds, and there was accord and satisfaction between the parties.

We have detailed the rather cumbersome and overlapping contentions in order that it not appear that any of them had been ignored.. However, we believe that the contentions present but two simple issues — (1) what were the rights of the parties as to *174the expiration records under the terms of the contract, and (2) what was the effect of the letter of cancellation.

The contract provides in no uncertain terms that—

“In the event of the termination of this Agreement, the Agent not being in default . . . the Agent’s record, use and control of expirations shall be deemed the property of the Agent and left in his undisputed possession; otherwise the records, use and control of expirations shall be vested in the Company.”

The agent was, without a question of fact, in default in his remittance of premiums due the company. The language of the insurance contract left no uncertainty as to whom the expiration records would belong in case of default on the part of the agent. In the recent case of Mays v. Middle Realty Corp., 202 Kan. 712, 452 P. 2d 279, we held:

“When the terms of a lease [contract] are plain and unambiguous the meaning must be determined by its contents alone and words cannot be read into the agreement which import an intent wholly unexpressed when it was executed.” (Syl. 4.)

Although this court has not had occasion to pass on the matter, it would appear that the right to ownership and possession of an insurance agency’s expiration records are a proper matter for contract. Appellants call our attention to an annotation in 124 A. L. R. 1355 discussing the rights as between insurance companies and agents in respect to expirations and renewals. However, on page 1361 of the same annotation we find the following statement:

“The rule that expirations belong to the insurance agent upon the termination of the agency does not apply in the case of contract provisions to the contrary, and the agency contract need not expressly deny the right of the agent to expirations, but such denial may be implied from the provisions of the contract.” (See, also, 44 C. J. S., Insurance, § 148, p. 813.)

Appellants have a further suggestion as to the agency contract. They state:

“Before getting into specifics on this proposal, the appellant Scheufler urged that a contract such as Plaintiffs’ . . . which provide for the taking away of an independent agent’s most valuable asset, his expiration records, be declared to be against public policy and void. . . . These small businessmen spend their lifetime developing an agency so that their expiration records can sustain them and they can eventually retire by selling their expiration records. . . .”

We have already stated that the right to possession and control of an insurance agency’s expiration records are proper matters for contract. Such a contract is, therefore, not against public policy.

*175If appellants are attempting to stress the facts and circumstances in this particular case, we are not impressed. The appellant, C. R. Scheufler, had been in default with his remittance of premiums four times during the eleven month period from December, 1961, to October, 1962. His accounts were not brought to date following the stop order issued October 31, 1962, when he was some $12,000.00 in default. He gave the appellees five checks carrying different dates in satisfaction of the default. These checks were all returned after deposit marked “Insufficient Funds.” In December of 1962, the First National Bank of Hoisington, Hoisington, Kansas, of which C. R. Scheufler was president, obtained a judgment against him for unauthorized loans in the sum of $27,874.95. He also suffered a loss in 1962 of $17,000.00 in the trucking business. He was not a small insurance agent being subjected to persecution. The appellees had ample grounds to believe C. R. Scheufler was not a proper representative to contact their insureds.

The letter of cancellation on which appellants rely reads:

“This will confirm the cancellation of your agency . . .
“The fact that your agency is in default in paying agency balances of these Companies, the records and control of expirations are now vested in our Companies. We will appoint another agent to service this business.
“Whatever amount is obtained from the sale of these expirations will be applied to your past due account. This may take some time and you will be responsible for any balance of the account still due.
“We hope with your cooperation that this balance will be small.”

When the letter of cancellation of the agency was written the appellees were making a generous gesture under the assumption that C. R. Scheufler would not compete with Vohs, the new agent, and solicit such expirations. Instead, Scheufler reconstructed the expiration records and proceeded to solicit their business.

On this point the trial court found:

“Vohs said that Scheufler told him he had reconstructed the expiration records of the Alliance Company policy holders. Vohs also said that Scheufler was calling upon Alliance policy holders whose policies were expiring and that he was unable to hold many such expirations. He said actually the expirations which he purchased from the Alliance Companies were really not worth anything. He did keep more than $3,000 worth of renewal business but he had to work to keep it. He finally did develop a good agency but this was because of the new business he worked up.
“Defendants thereafter gave no cooperation to plaintiffs. Defendants later threatened suit against the Vohs and the plaintiffs. Defendants solicited the expirations of plaintiffs’ insurance policies sold to Vohs and caused many *176difficulties to plaintiffs and Vohs, their new agent. Defendants put plaintiffs to substantial expenses, work and trouble to save the business of the companies in the Hoisington area.
“Since no consideration was received for this unilateral promise, it could be withdrawn at any time and plaintiffs were under no obligation to perform.”

We are constrained to agree with the trial court.

In Coder v. Smith, 156 Kan. 512, 134 P. 2d 408, in discussing consideration, we stated at page 513 of the opinion:

“In this court the question argued is whether the petition alleges any consideration for the oral promise. In 17 C. J. S. 420, Contracts, § 70, it is said: ‘Consideration is a benefit to the promisor or a loss or detriment to the promisee,’ citing many cases, including Brinkman v. Empire Gas and Fuel Co., 120 Kan. 602, 245 Pac. 107; Farmers Equity Coop. Ass’n v. Tice, 122 Kan. 127, 251 Pac. 421; Rempel v. Shell Petroleum Corp., 134 Kan. 350, 5 P. 2d 1094. Also, p. 421, § 71: ‘A contract must be supported by consideration to be valid and legally enforceable,’ citing McGregor v. Bank, 114 Kan. 356, 219 Pac. 520, and many other authorities. See, also, 12 Am. Jur. 564, Contracts, § 72.
“In Restatement, Contracts, the pertinent portion of section 75 reads:
“‘Definition of Consideration: (1) Consideration for a promise is (a) an act other than a promise, or (b) a forbearance, or (c) the creation, modification or destruction of a legal relation, or (d) a return promise, bargained for and given in exchange for the promise.’ ”

The appellants gave up nothing because of the suggestion in the letter of cancellation, the appellees received nothing of benefit, therefore there was no consideration and no binding and enforceable agreement. The conduct of C. R. Scheufler as related above certainly would not be indicative of any equitable claim.

Last — appellants contend that there is no basis in law or fact for the judgment rendered against Mrs. Scheufler.

On this issue the trial court found:

“On November 16, 1962, Leonard Williams, field representative of plaintiffs, called at the Scheufler Agency in Hoisington concerning the past due accounts and was then given checks by Mrs. Scheufler drawn upon the Peoples State Bank of Ellinwood, Kansas, as follows:
11-16-62 — FAI ..................... $705.36
11-16-62 — FAI ..................... 439.68
11-21-62 — AMC .................... 2,320.75
11-21-62 — AMC .................... 1,287.36
11-23-62 — AMC .................... 6,034.45
“Each check was signed on the lower right-hand side by C. R. Scheufler and across the left end by Mrs. C. R. Scheufler. Mrs. Scheufler said that she then knew and understood that by so doing she was making herself personally responsible for the payment thereof. Such debts were created through the defalcations of these defendants while acting in a fiduciary capacity.
*177“All of said checks were thereafter deposited and returned marked ‘Insufficient Funds.’
“Mrs. C. R. Scheufler testified that she had been appointed an insurance agent and that she knew that the collections of premiums were trust funds. She said she signed many policies as the agent for insurance companies, sometimes by signing her own name or else that of her husband and putting her initials underneath. She said the insurance premiums were placed in the Hoisington bank in the C. R. Scheufler account and that she wrote many checks. She said she wrote checks for rent, household expenses, living expenses and other matters. C. R. Scheufler said that she normally signed all the checks because she did the bookkeeping.” (Emphasis supplied.)

Based on the above findings, the trial court concluded:

“Mrs. C. R. Scheufler, having knowingly used trust funds for her personal benefit and for other than trust purposes and having signed the checks for $10,787.60 knowing and intending that she be liable for their payment, is personally liable along with her husband for such amount of money.”

The trial court’s findings were supported by substantial competent evidence and the findings support the conclusion of law. No further discussion of this issue would be justified.

What has been said disposes of appellant’s alleged counter claim.

A careful examination of the record discloses no justifiable reason for disturbing the judgment of the trial court.

The judgment is affirmed.

approved by the court.