Case Name: The People ex rel. Ernest Palmer, Director of Insurance, vs. The Peoria Life Insurance Company; (Margaret Hardwick et al. Appellants, vs. Charles V. O'Hern, Receiver, et al. Appellees.)
Court: Illinois Supreme Court
Jurisdiction: Illinois
Decision Date: 1941-04-15
Citations: 376 Ill. 517
Docket Number: No. 25695
Parties: The People ex rel. Ernest Palmer, Director of Insurance, vs. The Peoria Life Insurance Company.—(Margaret Hardwick et al. Appellants, vs. Charles V. O’Hern, Receiver, et al. Appellees.)
Judges: 
Reporter: Illinois Reports
Volume: 376
Pages: 517–532

Head Matter:
(No. 25695.
The People ex rel. Ernest Palmer, Director of Insurance, vs. The Peoria Life Insurance Company.—(Margaret Hardwick et al. Appellants, vs. Charles V. O’Hern, Receiver, et al. Appellees.)
Opinion filed April 15, 1941
Rehearing denied June 12, 1941.
Gunn, C.J., and Wilson, J., dissenting.
Harry E. Brown, Si-iurtlEFF & Niehaus, Miller Elliott & Westervelt, George Joe hem, and Charles F. Welsh, (John Niehaus, Jr., and Donald G. Beste, of counsel,) for appellants.
Cassidy, Knoblock & Sloan, (John F. Sloan, Jr., of counsel,) for appellee Charles V. O’Hern, Receiver.
D. I. Jarrett, George Z. Barnes, and George W. Hunt, (David J. Kadyic and Edmund D. Adcock, of counsel,) for appellee The Alliance Life Insurance Company.

Opinion:
Mr. Justice Shaw
deliveTed the opinion of the court:
This is an appeal, on leave granted, from the Appellate Court for the Second District, wherein an opinion was filed and a judgment entered affirming certain decrees and orders of the circuit court of Peoria county. The facts and general position of the parties with their contentions will be found fully reported in the opinion of the Appellate Court. (303 Ill. App. 430.) In our view of the case it will be unnecessary in this opinion to state them as fully as they are there stated.
The various appellants are either former agents or assignees of former agents of the defunct Peoria Life Insurance Company, a corporation under the laws of Illinois, which became insolvent in 1933, and for which a receiver was appointed on November 15 of that year pursuant to the Insurance Liquidation act. (Ill. Rev. Stat. 1933, chap. 73, secs. 105 et seq.) It is for us to decide whether these agents may recover commissions on renewal premiums paid to the receiver from his appointment to the date of the reinsurance agreement, and whether they can recover such commissions on renewals from the insuring company, after the execution of the reinsurance agreement. The circuit court and the- Appellate Court have decided against the claims of the agents on both points.
After the Peoria Life Insurance Company (hereinafter referred to as the Peoria Company) had been found insolvent and the order entered that it should be liquidated, the receiver entered into a contract of reinsurance, pursuant to the provisions of the foregoing act, with the Life and Casualty Company of Chicago, which afterwards changed its name to the Alliance Life Insurance Company, (hereinafter referred to as The Alliance.) The court found that the plan of reinsurance was a proper step in the liquidation of the Peoria Company and that it would advance the best interests of the policyholders who assented thereto, and of all others who were entitled to share in the assets of that company. The last mentioned order was entered on August 22, 1934. About three years after the entry of this order, appellants filed their amended claims with the receiver, based upon contracts which they had held with the Peoria Company. These were agency contracts which had been executed between 1914 and 1929, and by which the agents were entitled to receive from the Peoria Company certain commissions or premiums and renewal premiums of policies issued by or under them. While the contracts are not identical, they are substantially the same and may be regarded as identical for the purposes of this opinion. Under these agreements the agents were permitted and required to solicit life insurance business for the Peoria Company and the commissions they were to receive, so far as the matter is material to this suit, were to be paid on renewal premiums for various periods of years specified in each individual contract. Many of these agreements as to commissions on renewal premiums extended far beyond the date of dissolution of the Peoria Company.
All renewal commissions were paid to all of the claimants in accordance with the terms of their contracts up to the date of the appointment of the receiver. Shortly after this appoinment, the circuit court ordered the receiver to accept and hold, until the further order of the court, all premiums tendered by policyholders and to give proper receipts therefor. After the effective date of the reinsurance agreement, the premiums of all policyholders who elected to come in under that agreement were paid directly to The Alliance.
The details of the contract for reinsurance are long and complicated and require nothing more than a brief outline. By its terms, nearly all of the assets of the Peoria Company were transferred to The Alliance, as consideration for the reinsurance agreement and The Alliance re-insured and assumed the liability of the Peoria Company on outstanding life insurance policies of assenting policyholders, subject to a lien against each policy, which was tentatively fixed at fifty per cent of the net value of each policy, subject to certain adjustments to be thereafter made. The agreement provided for the eventual discharge of the lien on certain future contingencies, and, in the meantime, provided for segregation of all the assets of the former Peoria Company in a fund to be known as the "Peoria Life Fund." This agreement covers eleven double column pages in the abstract, printed in fine print, but we do not deem any other portion of it material to this opinion except paragraph 37 thereof. In that paragraph of the agreement it was definitely provided that The Alliance did not assume any obligation under any contract theretofore made by the Peoria Company, with any agent (regardless of classification) manager or supervisor, or with any other person, persons or corporation for personal services. Under the plain and unambiguous provision of this paragraph, it is obvious that the appellants cannot prevail as against The Alliance unless they can point out some legal means whereby an obligation will be fixed on that company directly contrary to the only contract it has signed.
The affairs of the Peoria Company have been before this court on two previous occasions and in each of those cases we have recognized that the affairs of the Peoria Company have been liquidated. In People v. Niehaus, 356 Ill. 104, we recognized the validity of the Insurance Liquidation act and sustained the power of the Director of Insurance to appoint the receiver for the Peoria Company, as against an attempted order by the circuit judge in Peoria county. In the later case of People v. Peoria Life Ins. Co. 357 Ill. 486, we reaffirmed our holding in the case last cited, confirmed the power of the Director of Insurance to carry out the liquidation of the Peoria Company and held that pursuant to the statute, and by the decree of liquidation, the legal title to all of the property of the Peoria Company vested in the receiver.
In contracts which require the continued existence of the particular person or thing, the destruction or death of that person or thing will terminate the agreement. (Martin Emerich Outfitting Co. v. Siegel, Cooper & Co. 237 Ill. 610; 2 Restatement of Contracts, sec. 458.) The agency contracts here in question were necessarily, and as a matter of law dependent for their continued existence upon the lawfully continued existence of the Peoria Company and the parties are conclusively presumed to have entered into those contracts in contemplation of the possibility of the insurance company's insolvency and its liquidation under the Insurance Liquidation act above cited.
A consideration of the question of liquidation brings us to the one narrow point which is decisive of the case. The appellants, from sheer necessity, rest their entire case upon a theory that the reinsurance contract between the receiver and The Alliance amounted only to a continuation of the business of the Peoria Company and, by implication, they admitted that if the Peoria Company was liquidated they would have no claim other than a demand against the fund in the hands of the receiver. They point to a clause in the preamble to the reinsurance agreement, which they say, sustains their position. This clause is as follows: "Whereas, a large part of the assets of the Peoria Life Insurance Company is invested in that class of securities which has depressed greatly with current depression markets and great loss would accrue to the policyholders of such company, their beneficiaries and their dependents, if forced liquidation of all assets were undertaken in present markets." This argument requires no further answer than to say that it fails to distinguish between a liquidation of assets, which is one thing, and the liquidation of a company, which is something entirely different. The appellants say in their brief that in deciding the case we must keep certain considerations in mind, thus: "The distinction must also be preserved between the case of an insurance company that is completely liquidated (in which case the agents' commissions would be reduced to a demand against the fund in the hands of the receiver) and a case like the present one, where, instead of completing the liquidation, all the policies are reinsured and all the insurance business is delivered over in bulk to the reinsuring company and the policies continued without interruption, except as to such policyholders who desired to cash in on their surrender value."
The arguments of the appellants in this behalf are not in any way concurred in by this court. When the receiver was appointed and the decree for liquidation was entered, the title to all of the property of the Peoria Company passed to the receiver by virtue of the Insurance Liquidation act, and we have so held in People v. Peoria Life Ins. Co. supra. From that moment, the Peoria Company had no further corporate power for any purpose for which it had been organized. It could not employ agents, issue policies of insurance, accept premiums or pay claims. Every contract which had been made with it was disaffirmed and every contracting party reduced to such claim as he might have against the receiver. Quite contrary to appellant's contention, the contract with The Alliance was not a continuation of the business of the Peoria Company, but an entirely new contract which was not even, in a strict sense, a reinsurance contract. The policyholder is not a party to a reinsurance contract, if it be strictly defined, and it has been held that he cannot bring a suit directly against the reinsuring company. (Vial v. Norwich Union Fire Ins. Society, 257 Ill. 355.) In this case The Alliance assumed the position of insurer only with those policyholders of the Peoria Company who expressly assented and agreed thereto. In this respect the contract is distinguishable from a reinsurance contract. No policyholder ever had any contract with any of the appellants, and neither did The Alliance. The appellants never had any interest in or lien upon any premium ever paid by any policyholder and the only' relationship which those premiums bear to the compensation of the agents, is that they were used as a unit for measuring and determining those commissions. When the Peoria Company ceased to be an insurance company, it became and was the duty of the Director of Insurance to utilize its assets for the best interests of its creditors, and that is exactly what was done. In view of the difficulty of realizing the utmost possible from those assets by a sale thereof, the difficulty or impossibility of policyholders, who had grown older, to secure other insurance, and for many other practical reasons, it was the judgment of the circuit court, that those assets could best be applied to a reinsurance contract. Those policyholders who wished to have their portion of the assets so applied concurred in the reinsurance agreement, and it was their assets and their future payments which were applied to that purpose. Policyholders not wishing to concur in the reinsurance plant were not required to do so, but were paid in cash their pro rata share of their respective equities in their respective policies. No agent contributed in any way to- this reinsurance contract and there was no lien or claim of any agent which could impair the receiver's duty to purchase for the policyholders as much insurance as such policyholder's share of assets would buy for him.
There is no case cited to us which sustains the contention made by the appellants in its full length and breadth. They rely quite strongly on General American Life Ins. Co. v. Roach, 179 Okla. 301, 65 Pac. (2d) 458. There is much in the language of the court in that case to sustain appellants' position and although there are some distinguishing facts which might be pointed out, and which the Appellate Court did point out, it is sufficient for us to say that we do not agree with its reasoning or results. On the other hand, there are many cases from other jurisdictions which sustain the views we have expressed concerning this case. Several of those cases are reviewed in the opinion of the Appellate Court, but we consider the point so plain that extensive comment on other cases is not required. (Layton v. Illinois Life Ins. Co. 81 Fed. (2d) 600, certiorari denied, 298 U. S. 681; North Carolina State Life Ins. Co. v. Williams, 91 N. C. 69, 49 Am. Rep. 637; Hepburn v. Montgomery, 97 N. Y. 617; Fass v. Atlantic Life Ins. Co. 105 S. C. 107; Kansas Union Life Ins. Co. v. Bucman, 141 Fed. 835.) In a note in 79 A. L. R. 478, the general rule is stated to be that after any rightful termination of an agency the agent is not entitled to commissions on renewal premiums, unless his contract of agency so provides. In support of this rule cases are cited from eighteen States and the Federal courts.
There is no contractual or other legal basis on which the appellants' claims can be sustained and the Appellate Court was right in .affirming the orders and decrees of the circuit court.
The judgment of the Appellate Court is affirmed.
Judgment affirmed.