Case ID: ohio-cc-dec_25/html/0266-01.html
Source: Caselaw Access Project
Author: {"author": "ALLREAD, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

INSURANCE — PRINCIPAL AND AGENT.
    [Franklin (2nd) Circuit Court,
    February 6, 1912.]
    Dustin, Allread and Ferneding, JJ.
    
      Bryson-Bedwell-Brubacher Co. v. J. J. Archer et al. (Three Cases.)
    Custom Among Fire Insurance Agencies to Control Information of Expirations not Binding on Strangers to Sale of Agency.
    The purchasers of a fire insurance agency, with a covenant that the vendors will not engage in a competitive business for a period of years, can not bind by a custom as to the control of information with reference to expiration of policies, and thereby restrict the rights of others who were not parties to the contract of purchase and sale.
    
      Huggins, Huggins & Hoover, for plaintiff in error:
    Cited and commented npon by the following authorities. Steamboat Albatross v. Wayne, 16 Ohio 513; Browne, Usag. & Oust. 12, 24, 54; Thomas v. Trust Co. 81 Ohio St. 432 [91 N. E. Rep. 183;- 26 L. R. A. (N. S.) 1210] ; Columbus & H. Coal Co. v. Tucker, 48 Ohio St. 41, 60 [26 N. E. Rep. 630; 12 L. R. A. 577; 29 Am. St. Rep. 528]; Baine v. Bickett, 13 Dee. Re. 476 (1 C. S. C. 161); White v. Brocaw, 14 Ohio St. 339; Beardsley v. Foot, 14 Ohio St. 414; Morgan v. Spangler, 14 Ohio St. 102; State v. Goshen Tp. (Tr.) 14 Ohio St. 569; Ramsey v. Jones, 41 Ohio St. 685; Bocock v. Pavey, 8 Ohio St. 270; Ensel v. Levy, 46 Ohio St. 255 [19 N. E. Rep. 597] ; Welty v. Vulgamore, 24 O. C. C. 553 (1 N. S. 533).
    
      J. W. Mooney and R. M. Edmonds, for defendants in error:
    Cited and commented upon by the following authorities: Merchants Ins. Co. v. Prince, 50 Minn. 53 [52 N. W. Rep. 131; 36 Am. St. Rep. 626] ; Dempsey v. Dobson, 184 Pa. St. 588 [39 Atl. Rep. 493; 40 L. R. A. 550; 63 Am. St. Rep. 809] ; Castle-man v. Insurance Co. 77 Ky, (14 Bush.) 197; National Fire Ins. Co. v. Sullard, 97 App. Div. 233 [89 N. Y. Supp. 934] ; Seifried v. May cox, 14 Dec. 536; Robb v. Green, 2 Q. B. Div. 1; 2 Story, Equity Sec. 5 952; Grand Union Tea Co. v. Dodds, 164 Mich. 50 [128 N. W. Rep. 1090; 31 L. R. A. (N. S.) 260n] ; Witkop v. Boyce, 112 N. Y. Supp. 874; Thomas v. Trust Co. 81 Ohio St. 432 [91 N. E. Rep. 183; 26 L. R. A. (N. S.) 1210] ; Inglebright v. Hammond, 19 Ohio 337 [53 Am. Dec. 430] ; Columbus <& H. Coal I. Co. v. Tucker, 48 Ohio St. 41 [26 N. E. Rep. 630; 12 L. R. A. 577; 29 Am. St. Rep. 528] ; Thompson v. Riggs, 72 U. S. (5 Wall.) 6-63 [18 L. Ed. 704]; Tilley v. Chicago, 103 U. S. 155 [26 L. Ed. 374] ; Savings Bank v. Ward, 100 U. S. 195 [25 L. Ed. 621]; Morgan v. Spangler, 14 Ohio St. 102; Kitzmiller v. Van Rensselaer, 10 Ohio St. 63; Weidemann v. Breweries Co. 78 Conn. 660 [63 Atl. Rep. 162] ; Stevens v. Ludlum, 46 Minn. 160 [48 N. W. Rep. 771; 13 L. R. A. 270; 24 Am. St. Rep. 210]; Danforth v. Adams, 29 Conn. 107; Walker v. Vaughn, 33 Conn. 577; Kinney v. Whiton, 44 Conn. 262 [26 Am. Rep. 462] ; 16 Cyc. 720; Woodruff v. Montgomery, 30 O. C. C. 426 (11 N. S. 72); State v. Goshen Tp. (Tr.) 14 Ohio St. 569; Ramsey v. J ones, 41 Ohio St. 685; White 'v. Brocaw, 14 Ohio St. 339; Meyer v. Dresser, 111 Eng. C. L. R. 646; Stoever v. Whitman, 6 Binn. (Pa.) 416.
    
      
      Affirmed, no op., Bryson-Bedwell-Brubacher Co. v. Archer, 89 O. S. 413.
    
   ALLREAD, J.

The plaintiffs in error, who were also plaintiffs below, are a local fire insurance agency, and allege that they purchased of the O’Kane-Beeson Agency of Columbus, Ohio, for a full and valuable consideration, its policy expirations, business, books and good will, with a covenant that the vendors would not engage in competitive business for a period of five years.

The plaintiffs allege that the defendant, Archer, in the first two cases, and Lewis in the third, have been appointed agents by the respective insurance companies, and are, by use of knowledge of existence and expiration of policies obtained from the books of the respective insurance companies, interfering with and attempting to secure renewals of policies in violation of the agreement in the transfer of the business of the O’Kane-Beeson Agency. Neither the insurance companies, nor Archer and Lewis, are parties to any contract with the plaintiff. They are, however, sough t to be bound by a custom by which local agencies in Columbus and elsewhere are permitted to own and control the information as to the expiration of policies and to hold the exclusive right to use such information and solicit renewals. It. is also asserted that the plaintiff in making the purchase relied upon this custom.

The court of common pleas sustained a demurrer to the amended petition stating the above facts and rendered final judgment for the defendants.

The questions presented by the petition in error are interesting and important. Counsel for the respective parties have very fully argued the questions involved and have cited and discussed many authorities.

¥e are clearly of opinion that exclusive of the averments as to custom and usage the amended petition does not state a good cause of action. "We concur fully in the opinion of the trial judge upon the demurrer to the original petition.

The most difficult question presented arises upon consideration of the effect of the added averments as to custom. Contracts as to good will incident to a sale of business, while subject to certain rigid tests, are, if those tests are fully met, sustainable under repeated decisions o'f the Supreme Court. The tests of legality of such contracts is defined by Judge Banney in the opinion in Lange v. Werk, 2 Ohio St. 520. There is no doubt, therefore, of the validity of the transfer of the good will of the local agency.

The question is whether the good will of the local agency can be augmented through custom so as to include a restriction against the principal from the use of books and information in the principal’s custody relating to the business of the principal. It has been repeatedly held that usage and custom can not be employed to take the place of contract nor to create property rights. This principle is laid down by Caldwell, J., in the opinion in Inglebright v. Hammond, 19 Ohio 344 [53 Am. Dec. 430], as follows:

‘‘ Evidence of custom may properly be given to explain and give the proper effect to the contracts and acts of parties; but it would be carrying the doctrine too far to permit a custom to change the title to property contrary to an established rule of law. ’ ’

The same principle is fully established in the cases of Columbus & H. Coal & I. Co. v. Tucker, 48 Ohio St. 41 [26 N. E. Rep. 630; 12 L. R. A. 577; 29 Am. St. Rep. 528], and Thomas v. Trust Co. 81 Ohio St. 432 [91 N. E. Rep. 183; 26 L. R. A. (N. S.) 1210]. In the syllabus in the last case the rule is stated as follows:

“Usage or custom cannot create a contract or liability where none otherwise exists. A usage or custom can only be used to explain or aid in the interpretation of, a contract or liability existing independently of it.”

The plaintiffs, having no contract relation with the insuranee companies, cannot by force of custom and usage assert a right to enforce a restriction upon the insurance companies in. the carrying on of their business and the use of information founded upon boobs and records in their possession.

It is urged that the usage and custom can be applied to-enlarge the agency contract between the insurance companies and the 0’Kane-Beeson Agency, thereby enabling the latter to-transfer the enlarged good will.

It must be kept in mind, however, that the 0’Kane-Beeson. Agency were agents, and that they cannot;, therefore, by usage and custom build up rights inconsistent with the principle of agency. The doctrine of agency and the respective rights of the parties are established by the general principles of the common law and made more effective as applied to insurance companies by statutory provision.

The custom and usage set forth in the amended petition is; in our opinion inconsistent with the common law and statutory principles of agency and unduly restrictive of the rights and franchise of the principals. Merchants Ins. Co. v. Prince, 50 Minn. 53 [52 N. W. Rep. 131; 36 Am. St. Rep. 626] ; Dempsey v. Dobson, 184 Pa. St. 588 [39 Atl. Rep. 493; 40 L. R. A. 550; 63 Am. St. Rep. 809] ; Castleman v. Insurance Co. 77 Ky. (14 Bush.) 197.

The learned counsel for plaintiffs in error do not deny the right of the principals to revoke the authority of the agent, but their contention would have the effect upon revocation of retaining substantial rights as against the principal, which, we think, is equally inconsistent with the common law and statutory principles of agency.

The alleged custom not being valid to restrict the principals in the use of their own boobs in obtaining business and being contrary to established principles of the law, the plaintiffs had no right to rely thereon and can claim nothing by way of estoppel.

The judgments of -the-court of common pleas will, therefore, be affirmed.

Dustin and Ferneding, JJ., concur.