Summary
In Buska, too, we had an insurance-agency contract which provided for diminution of renewal commissions upon its termination which could be done on written notice.
Summary of this case from Matthew v. American Family Mut. Ins. Co.Opinion
October 7, 1966. —
November 1, 1966.
APPEAL from an order of the circuit court for Marathon county: GERALD J. BOILEAU, Circuit Judge. Reversed.
For the appellant there were briefs by Genrich, Terwilliger, Wakeen, Piehler Conway, attorneys, and Richard J. Weber of counsel, all of Wausau, and oral argument by Herbert L. Terwilliger.
For the respondent there was a brief and oral argument by Larry W. Rader of Wausau.
Action by plaintiff Joseph B. Buska against defendant Central Life Assurance Company to recover renewal commissions claimed to be due plaintiff on life insurance and annuity policies issued by defendant.
After issue was joined, defendant moved for summary judgment dismissing plaintiff's complaint upon the merits. The facts herein stated are taken from the pleadings and from the affidavits and other proof filed in support of, and in opposition to, the motion for summary judgment.
Defendant has its home office in Des Moines, Iowa. On December 31, 1953, plaintiff entered into an agent's contract with defendant and one Tucker, defendant's general agent, whereby he was appointed its agent with authority to solicit and take applications for life insurance annuities and to collect certain premiums within the territory described as "Wausau and vicinity." This contract named Tucker as party of the first part, plaintiff as party of the second part, and the company was referred to as the Society. The contract provided for compensation to plaintiff based upon premiums actually paid on insurance written by him. It provided further that the number of renewal commissions payable to plaintiff on policies dated in any contract year were to be determined in accordance with a schedule incorporated therein and made a part of the agency contract. The pertinent provisions with respect to termination of the contract are as follows:
"Paragraph 4. (a) Upon termination of this contract under the provisions of Paragraph 11 (a) hereof the remaining number of renewal commissions provided for herein shall be reduced by three (3) — provided, however, that in the event of the death of the second party or should the second party become totally disabled as a result of bodily injury or disease so as to be wholly prevented thereby from engaging in any business or occupation or performing any work for remuneration or profit then in that event the number of said renewal commissions shall not be reduced.
"(b) After termination of this contract under the provisions of Paragraph 11 (a) hereof it is agreed that if for any period of six consecutive months the total amount of renewal commissions paid to second party under the provisions of this contract shall average less than $25.00 per month the payment of such renewal commissions shall cease.
"(c) Upon termination of this contract under the provisions of Paragraph 11 (b) hereof all renewal commissions shall cease.
". . .
"Paragraph 11. (a) Termination of Contract. This contract may be terminated by first party, second party or the Society on thirty (30) days' notice to that effect. It shall terminate upon the death or total and permanent disability of second party (the Society being the sole judge of the fact of such disability), or upon the death or total and permanent disability (as hereinabove defined) of any member of a partnership if second party be a partnership.
"(b) Termination of Contract Without Notice. This contract may be terminated forthwith by the Society without notice upon failure of second party to comply with the laws of the State of Iowa and the rules of the Insurance Department of such state and the laws and rules of the state and insurance department of the second party's residence."
On October 27, 1964, defendant company gave plaintiff written notice of termination of the contract, such termination to be effective November 30, 1964. The reason stated for the termination was that plaintiff's activities had been directed "more and more in the interests of other companies and less and less in the interests of Central Life." In its answer, as an affirmative defense Central Life, stated in part:
"That such termination . . . was, as this defendant is informed and verily believes, for reasonable cause, in that the plaintiff, Joseph B. Buska, had failed for a long period of time to. sell sufficient life insurance contracts through and with the defendant company as to make it economically feasible to continue him as an agent; and, further, as defendant is informed and verily believes, Joseph B. Buska, had, for a long period of time, been selling for and acting on behalf of other competing life insurance companies . . . ."
In an affidavit submitted by the company in support of its motion for summary judgment, it is stated in substance that it is a policy of the company to have its policies sold and serviced by full-time career men who represent Central Life only, but that with respect to plaintiff this policy had been disregarded. The same affidavit contains a list showing plaintiff's production from 1953 through 1964. The list reveals a substantial decrease in his productivity as evidenced by a volume of sales in 1956 of $436,335, as compared with $54,000 in 1964.
Plaintiff responded to the company's termination notice by letter dated December 8, 1964, in which he stated, "[I]n order to keep competitive and to keep growing, we had to turn to another insurance company."
The circuit court, by order entered January 12, 1966, denied the motion for summary judgment, and defendant company has appealed therefrom.
The point of controversy between plaintiff and defendant company is the extent of the latter's obligation to pay plaintiff renewal commissions which accrued subsequent to November 30, 1964. The company contends that the schedule of renewal commissions set forth in the contract is to be reduced by three, while plaintiff maintains that there should be no such reduction because the company did not have good cause for terminating his agency contract.
Par. 11 (a) of the agency contract expressly provides that either the plaintiff or the company may terminate upon thirty days' notice without any requirement of stating a reason for such action and that in such event plaintiff's renewal commissions are to be reduced by three. Therefore, defendant company must prevail unless there is some reason of public policy that qualifies this right to terminate.
Plaintiff relies principally on the following statement appearing in Williston on Contracts:
"The contract between the insurance company and the agent often provides expressly for continuance or cessation of commissions upon renewal premiums after termination of the agent's employment. In such case, the contract is enforced without regard to whether termination of the employment is caused by the resignation or discharge of the agent. If, however, the discharge was wrongful, the agent is entitled to damages for the refusal to allow him to earn the renewal premiums, even though the contract provides that the right to such premiums shall cease on termination of the employment." (Emphasis supplied.)
4 Williston, Contracts (rev. ed.), pp. 2875, 2876, sec. 1030.
Plaintiff apparently interprets wrongful discharge as embracing a termination made in accordance with the terms of the agency contract if the termination is for a reason not constituting good cause. We reject such a strained interpretation because a discharge without good cause is not wrongful if expressly authorized by the contract. We find the principle of law which we deem controls the result here well stated in Corbin, Contracts, as follows:
"In contracts of agency or other employment, it is often provided that one or both of the parties shall have the power to terminate the agency or employment at any time . . . [or] by giving notice. When the required notice is given, neither party is under a duty of further performance; the contract may be said to be `discharged.' . . . the rights of the parties with respect to performances rendered . . . before the, notice became operative . . . depend[s] upon the provisions of the `discharged' contract." (Emphasis supplied.)
5A Corbin, Contracts, p. 510, sec. 1229. See also 3 Couch, Insurance (2d ed.), pp. 511, 513, sec. 26:49.
In a case not unlike the case at bar, Shain v. Washington National Ins. Co., a provision that either party could terminate an agency agreement upon compliance with the specified period of notice was said to be valid. In that case Shain, a general agent of the defendant insurance company, brought an action for the alleged wrongful termination of his agency contract. The contract provided that either party could terminate upon thirty days' notice in writing. The controversy focused on the question of whether the notice of termination conformed to the terms of the contract. The court ruled in favor of the defendant insurance company. In so doing it made this statement which is strikingly apposite to the case at hand:
(8th Cir. 1962), 308 F.2d 611, 96 A.L.R.2d 265.
As to the validity of such provisions see also 17 Am. Jur.2d, Contracts, pp. 972, 973, sec. 498; 17A C.J.S., Contracts, pp. 481, 483, sec. 399.
"Shain urges that in the present case the notice did indeed materially impair substantial existing rights which he possessed. These were the lessening of the value of his general agent's renewal commissions and his inability to solicit the agency clientele he had developed. The immediate answer to this observation is that the contract expressly provided for termination by either party. This, then, was nothing other than what Shain had agreed to. If there was hardship here, it was due to the contract itself and to its failure to afford the plaintiff more adequate protection against termination." (Emphasis supplied.)
Supra, footnote 3, at page 616. See also 16 Appleman, Insurance Law and Practice, p. 495, sec. 9005, and Annos.: Insurance agent's right to commission on renewal premiums, 79 A.L.R. 475, 136 A.L.R. 160, and 163 A.L.R. 1470.
We deem the same reasoning applicable to and dispositive of the instant case.
By the Court. — Order reversed, and cause remanded with directions to enter judgment dismissing the complaint on the merits.