Case Name: Henry P. Townsley, Appellant, v. Niagara Life Insurance Company, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1913-12-31
Citations: 160 A.D. 177
Docket Number: 
Parties: Henry P. Townsley, Appellant, v. Niagara Life Insurance Company, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 160
Pages: 177–190

Head Matter:
Henry P. Townsley, Appellant, v. Niagara Life Insurance Company, Respondent.
First Department,
December 31, 1913.
Contract—action on contract to recover percentage of renewal premiums on life insurance policies — judgment in action on subsequent contract.
Action to recover a percentage of certain renewal premiums on life insurance policies, issued by the defendant, based upon a contract between the defendant’s predecessor and the plaintiff. Provisions of this con tract and a subsequent contract between the parties examined, and held, that a judgment for the plaintiff in an action for the breach of the latter contract is a bar to the present •action.
Hotchkiss, J., dissented, with opinion.
Appeal by the plaintiff, Henry P. Townsley, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 26th day of November, 1912, upon the verdict of a jury rendered by direction of the court, and also from an order entered in said clerk’s office on the 25th day of November, 1912, denying plaintiff’s motion for a new trial made upon the minutes.
Harry N. Selvage, for the appellant.
Gilbert E. Roe, for the respondent.

Opinion:
Ingraham, P. J.:
The action is brought to recover a percentage of certain renewal premiums on policies issued by the defendant based upon a contract, dated July 20, 1893, between the Bank Clerks' Mutual Benefit Association of the City of New York (defendant's predecessor) and the plaintiff. In the complaint that contract is treated as a valid, existing contract and the claim for relief is based entirely upon its provisions, and a copy of it is annexed1 to the complaint. By that contract the plaintiff was appointed general manager of the association, and it conferred upon him all the powers and required of him all the duties of said position under the constitution and by-laws of the association. The full compensation of the plaintiff was to be as follows: " On all first year's premiums, a commission of 60 per cent to be paid to the said party of the second part, as said premiums are paid to the party of the first part. In addition thereto, on the 31st day of December in each year, the said party of the second part, shall be allowed and paid a renewal commission equal to one dollar for each $1,000 of insurance in force on said day in Class B of said party of the first part." Then followed a provision as to the amount of business that the plaintiff was to have placed upon the books of the association. The contract further provided: "This contract shall continue during the faithful performance of his duties by the said party of the second part, unless sooner terminated by mutual consent. Should this contract be terminated otherwise than by mutual consent, then the renewal commissions aforesaid, on all the insurance established at the date of said termination, shall be payable as aforesaid, to the said party of the second part, or to his heirs, executors, administrators or assigns, during the next ten years following said termination, at which time all his interest therein shall cease."
It will be noticed that by this contract there was no time fixed during which the employment should continue. It was not a contract of employment for any particular time. The plaintiff was not bound to service with the defendant, but evidently would have a right to terminate his contract by resigning his position at any time, and I think it clear that under the terms of this contract the employment by the association was not to be unlimited or during the life of the plaintiff, but was to be terminable at will by the association as well as by the plaintiff. Thus either party could terminate the contract, and provision was made for what would happen upon such termination. It was undoubtedly beyond the power of the officers or directors to have made a contract of this kind, which would be perpetual or last during the lifetime of the plaintiff or of the corporation (Beers v. New York Life Ins. Co., 66 Hun, 75), and the contract does not upon its face purport to impose such an obligation upon the corporation. It says that the " contract shall continue during the faithful performance of his duties by the said party of the second part, unless sooner terminated by mutual consent." But this provision, read with the other provisions of the contract, seems to me clearly to imply that either party should have the right to terminate the contract at will, and it was therein provided that if the contract should be terminated otherwise than by mutual consent, thus recognizing the right of either party to terminate the contract, the plaintiff should receive certain percentages of the renewal premiums on policies issued during the time that he was general manager of the association.
The complaint further alleges that on or about August 20, 1896, at which time the contract was in full force and effect, "the defendant claimed to abrogate, annul and terminate the aforesaid agreement of July 20th, 1893, but the plaintiff insisted that the defendant had no right or authority to abrogate, annul or terminate the same and that its action was without any force or effect as against him; and thereupon it was on October 1st, 1896, agreed by and between the plaintiff and the defendant that all business done by the defendant and all insurance written by it up to and including the 30th' day of September, 1896, should be governed by and subject to the terms of said contract of July 20th, 1893, and that all sums of money due or to grow due to the plaintiff under said contract of July 20th, 1893, should be paid to him or his legal representatives in all respects as in said contract provided, and that the said contract except as to the business done thereunder as aforesaid and except as to deferred first year's premiums and except as to renewals written up to and including September 30th, 1896, should be canceled." The action is to recover the percentage of premiums received upon renewals of policies issued during the time when the contract of July 20, 1893, was in force.
The situation of the parties at the time this contract of October 1, 1896, was executed was that the plaintiff had acted under the contract of July 20, 1893; had obtained certain insurance for the defendant for which he had received his commissions; that the contract had been abrogated by the defendant, the plaintiff claiming that such abrogation was illegal, but the plaintiff was entitled to a renewal commission equál to $1 for each $1,000 of insurance in force on the thirty-first day of December in each year in Class B of the defendant for ten years following the termination of the contract. Thus, whenever a policy which had been issued by the defendant during the time the plaintiff's contract was in force and he was its general manager should be renewed, the. plaintiff would be entitled to $1 commission on every $1,000 of insurance, and that right to a renewal • commission was to continue for ten years from the termination of the contract.
The parties then made this agreement of October 1, 1896. That contract recited the contract of 1893; recited that defend ant had claimed to abrogate and annul the contract and that the plaintiff insisted that the company had no right or authority to abrogate or annul said contract; and it was then provided that all business done by the company and insurance written by it up to and including September 30, 1896, should be governed by and subject to the terms of the contract of 1893, and all sums of money due to the plaintiff under said contract should be paid to him in all respects as in said contract provided, and that said contract, except as to the business done thereunder as aforesaid and except as to deferred first-year premiums and except as to renewals written up to and including September 30, 1896, was wholly canceled.
The first question presented is as to what payments or obligations of the defendant which had accrued or would accrue under the contract of 1893 were kept in force by this provision. The contract had been abrogated on August 20, 1896, and it is presumed that policies had been issued by the defendant between that date and the 1st of October, 1896. There were, also, what were called deferred premiums, which were premiums on policies that had been , issued but which had not been paid at the time the contract was made. As to these two classes of premiums undoubtedly the plaintiff would be entitled to be paid his commissions. There was also commission on the renewal of policies the premiums of which had, prior to the first of October, been received by the company to which the plaintiff was entitled to his commission. The contract, it seems to me, covered these commissions, but it expressly provided that except as to renewals written up to and including September 30, 1896, the contract of 1893 was wholly canceled. Thus on all renewals that had been written up to and including September 30, 1896, the plaintiff was entitled to his commissions, but except as to such renewals the contract of 1893 was wholly canceled. The contract then appointed the plaintiff general manager; provided that as full compensation for his services as such manager he should receive on all first-year premiums a commission of eighty-five per cent, to be paid to him as such premiums are paid to the company; and in addition to such commissions on the last day of each month the general manager should be allowed and paid a renewal commission at the rate of $1 for each $1,000 of insurance renewed during the said month, such renewals to continue for the nine years succeeding the first year on each policy, but that such renewal commissions should not be paid after the first ten years of the life of each policy. This provision for commissions on renewal premiums does not expressly state to what policies it was to apply, but it contained a general provision that the renewal commission was to be upon each $1,000 of insurance renewed during said month. Under this provision I assume that the plaintiff would be entitled to a commission on each old policy whether obtained by him or while he was general manager of the company which was renewed by the defendant. The contract then provided that should it be terminated otherwise than by mutual consent then the renewal commissions on all the insurance accepted by the company at the date of such termination, and also the commissions on deferred premiums on first-year business then accepted shall be' payable as aforesaid to the general manager or his heirs, but not exceeding ten years in all. Thus, if the contract was terminated otherwise than by mutual consent, the plaintiff would be entitled to the renewal commission on all insurance accepted by the company at the date of such termination, i. e., on all its outstanding policies at that time, but not exceeding ten years in all.
The complaint contains no allegation as to the abrogation of this contract of 1896 and apparently the plaintiff does not rely upon it as establishing a cause of action. The answer, however, alleges as a separate defense that in April, 1897, the plaintiff commenced an action against the defendant alleging a breach of the 1896 contract; that that action was tried and resulted in a verdict for the plaintiff for $50,000, which was reversed on appeal to this court in Townsley v. Bankers' Life Ins. Co. (56 App. Div. 232); that there was a second trial which resulted in a verdict for the plaintiff for $10,000, which judgment was paid. Any liability under the 1893 contract which had been abrogated by the company was merged in the provisions of the 1896 contract, and it was there expressly provided that that contract except as to renewals written up to and including September 30, 1896, was canceled. Whatever right the plaintiff had to renewal premiums necessarily depended upon the provisions of the contract of 1896, and that contract expressly covered the obligation of the defendant to pay renewal premiums on all policies that were outstanding at the date of the abrogation of the contract, if not by mutual consent, and which were renewed by the defendant, of $1 for each $1,000 of insurance covered by the policies. That provision would include the renewal premiums which had been covered by the 1893 contract, for as to the renewal of policies that had not been written up on September 30, 1896, the 1893 contract was canceled. Thus the plaintiff's only right to recover was under the provisions of the 1896 contract, and when the defendant assumed to abrogate that contract it gave plaintiff a cause of action for the breach if the abrogation was unauthorized. Such a cause of action for a breach of the contract must necessarily include all the damages that the plaintiff had sustained in consequence of such breach. The plaintiff commenced such an action on April 1, 1897. The complaint in that action set up both the contract of 1893 and the contract of 1896; alleged that by the contract of 1896 the plaintiff was entitled to eighty-five per cent on all first-year premiums; that as additional compensation the defendant agreed to pay to the plaintiff on the last day of each month a renewal commission at the rate of $1 for each $1,000 of insurance renewed during said month; that on March 26, 1897, the defendant wrongfully claimed to abrogate and terminate the said contract of October 1, 18.96, to the damage of plaintiff in the sum of $200,000; and the plaintiff demanded judgment against the defendant for that sum. In this complaint was expressly alleged the obligation of the defendant to pay renewal commissions; that the defendant had abrogated that contract which included its obligation to pay renewal commissions; and for the abrogation of the contract the plaintiff demanded judgment. The defendant interposed an answer denying that the plaintiff had faithfully performed the duties to be performed by him and that thereupon the board and officers of the defendant declared the contract between the plaintiff and the defendant abrogated and terminated and directed the president to pay the sums due under the contract by its terms in full satisfaction of all claims under the said contract, and that such payments had been duly made. The issues raised by these pleadings came on for trial and the plaintiff recovered a verdict for $10,000, which was duly paid.
I, therefore, think that the judgment in the first action was a bar to this action. I also think that the contract of 1893 was entirely abrogated; all liability of the defendant under the contract of 1893 for renewal premiums written up after September 30, 1896, ended; the only right the plaintiff had was to recover under the 1896 contract damages for the abrogation of that contract, which damages he has recovered, and that, therefore, the plaintiff has no cause of action.
The judgment and order appealed from must, therefore, be affirmed, with costs.
McLaughlin and Dowling, JJ., concurred; Hotchkiss, J., dissented.
Laughlin, J.:
I am of opinion that this action was barred by the former judgment between the parties. It appears that on the 20th day of July, 1893, plaintiff was employed by the defendant as its general manager by a contract in writing; that he entered upon the employment pursuant thereto and so continued until the 20th day of August, 1896; and that on said day the board of directors of the defendant passed a resolution abrogating and annulling the contract on the alleged ground of neglect of duty on the part of the plaintiff in remaining abroad, but expressly empowering its executive committee to consult with plaintiff with a view to negotiating a new contract. The plaintiff maintained that the defendant was not justified by the facts in thus refusing to be bound by the contract, and it insisted that it was. The plaintiff, however, did not stand upon his rights under that contract, but consented to negotiate a new contract to take its place. On the 1st day of October, 1896, the parties made a new contract in writing for the employment of plaintiff by defendant as its. general manager, but limiting the period of employment to ten years, and containing different terms with respect to the amount of commissions and the time of payment of renewal commissions on new business, the amount of insurance to be written, and the man ner of employing and paying agents. Under the first contract, plaintiff was to bear all the expenses, including commissions of sub-agents, of writing insurance, and was to receive for his compensation a commission of sixty per cent of the first premiums on all policies issued by the defendant, and a further commission, designated "a renewal commission," equal to $1 for each $1,000 of the total insurance written by the company in force on the thirty-first day of December each year. That contract also provided that it should continue in force during the "faithful performance"by plaintiff of the duties devolving on him thereunder, " unless sooner terminated by mutual consent; " and it contained a provision with respect to the continuance of commissions, in the event of the termination of the contract otherwise than by mutual consent, as follows:
"Should this contract be terminated otherwise than by mutual consent, then the renewal commissions aforesaid, on all the insurance established at the date of said termination, shall be payable as aforesaid, to the said party of the second part, or to his heirs, executors, administrators or assigns, during the next ten years following said termination, at which time all his interest therein shall cease."
It is not entirely clear what was meant by the word "terminated " as thus used in the contract. It is argued by the learned counsel for the respondent, with much force, and there has been no attempt in the reply brief to answer it, that the parties had in mind a termination by disability or death of the plaintiff, or the dissolution or insolvency of the defendant, and that it was not intended to leave it optional with the plaintiff to abandon the employment at will and hold the defendant liable for commissions on renewal premiums, or optional with the defendant to discharge plaintiff at will and without cause and limit its liability to such renewal commissions, for ten years.
If, before making the second contract, the plaintiff - had brought an action to recover damages for the breach of the first contract, arising from the defendant's act in attempting to annul it, I am of opinion that he would have been obliged to recover all his damages in that action, and that he could not split them up and recover separately for the wrongful discharge, and. from year to year thereafter bring separate actions for his so-called renewal commissions on the total amount of insurance in force on the thirty-first day of December in each year for the succeeding ten years. In negotiating the second contract, the parties evidently agreed that the new provisions should not apply to commissions theretofore earned and unpaid, or afterwards to grow due to plaintiff on account of policies theretofore written, and that he should not be deprived of such commissions; and to cover this point it was provided in the second contract as follows: "That all business done by the Company, and all insurance written by it up to and including September 30th, 1896, shall be governed by and subject to the terms of the said contract of July 20th, 1893, and that all sums of money due or to grow due to said Townsley under said contract of July 20th, 1893, shall be paid to him or his legal representatives in all respects as in said contract provided, and that the said contract, except as to the business done thereunder as aforesaid, and except as to deferred first year's premiums, and except as to renewals written up to and including September 30th, 1896, is wholly cancelled." The plaintiff continued to discharge the duties of general manager of the defendant until the 26th day of March, 1897, when he was discharged.
On the twenty-second day of the month following he brought an action against the defendant alleging both contracts and the breach of. the second contract by a wrongful discharge and claiming damages in the sum of $200,000, and on the 9th day of June, 1903, he recovered a judgment therein for $10,821, which has been paid. The defendant duly pleaded and proved that judgment in bar of this action. It does not clearly appear whether or not on the final trial of that action the plaintiff sought to recover damages for being deprived of the benefits of the contract with respect to the so-called renewal commissions on premiums paid on policies written under the first contract as well as for having been deprived of the opportunity provided by the second contract for earning commissions on the first premiums and renewal premiums on new insurance of whether the verdict embraced both, and counsel for the respective parties differ on this question. If these items of damage gave rise to two causes of action, the burden of showing that they were both litigated was on defendant (Rudd v. Cornell, 171 N. Y. 114; Griffen v. Keese, 187 id. 454), and I think that it has not successfully borne it. I am of opinion, however, that plaintiff had but a single cause of action, and if so, it is not material whether he recovered all his damages, for, since he might have litigated in that action his right to commissions on the renewal premiums on insurance written under the first contract, he could not split up his claim into two or more causes of action. (Bendernagle v. Cocks, 19 Wend. 207; Goldberg v. Eastern Brewing Co., 136 App. Div. 692; Simon v. Bierbauer, 154 id. 506; Griffen v. Keese, supra; Cromwell v. County of Sac, 94 U. S. 351; Pakas v. Hollingshead, 184 N. Y. 211; Colburn v. Woodworth, 31 Barb. 381.) It is quite plain, I think, that by the second contract the first contract was terminated by mutual consent. Certain of its provisions were retained and made a part of the second contract and incorporated therein by reference, evidently for convenience, instead of being set forth in full. Nevertheless the new contract, even as to the provisions thus retained, became a substitute for the old. (See Crimmins v. Carlyle Realty Co., 132 App. Div. 664; Clark Cont. [2d ed.] 420; Bishop Cont. § 764, 768, 769.) The learned counsel for the plaintiff seeks to sustain this action on the theory, as I understand his argument, that it is based on the first contract with respect to commissions on renewal premiums for ten years after the termination of that contract, otherwise than by mutual consent; for, although the action was not brought -until December 29, 1910, no commissions are claimed after the year 1906. By the express terms of the second contract all provisions of the first contract, excepting in so far as they are incorporated therein, or retained by reference as aforesaid, are canceled. If the first contract was terminated by mutual consent, then it is clear from its provisions that all rights of the plaintiff, including the right to commissions, ceased and terminated, and if any right in that regard has been preserved it is by virtue of the new contract and as a condition of obtaining the mutual consent to cancel the first contract. The action could only be sustained under the first contract on the theory and ground that that contract had been terminated. Since, however, plaintiff refused to acquiesce in the action of the defendant in attempting to annul the first corn tract it cannot be maintained that it was terminated by the resolution passed by the board of directors of the defendant, to which he did not accede, and which resulted in the negotiation of the second contract. Assuming, without deciding," that either party could terminate the contract for cause, it has not been shown that sufficient cause existed to warrant the action taken by defendant, and I am of opinion that it was not intended that either party, without the consent of the other, could terminate it without cause. If, therefore, the first contract has been terminated, it must have been terminated by the new contract, and that would constitute a termination by mutual consent, which would not have entitled plaintiff to commissions under the first contract.- Moreover, the period for which the plaintiff claims the right to recover these commissions is substantially •— there is an unexplained difference of a month — the period of ten years commencing with the date of the second contract, which indicates that his claim is that the first contract was terminated by the second, and that he is entitled to recover under the first. This also shows that he does not claim that his wrongful discharge under the second contract terminated the first, for if he did the period during which he would be entitled to commissions would commence at the time of such wrongful discharge. But he does not claim the right to recover on that theory; and if he did, manifestly his cause of action would be predicated on the wrongful discharge under the second contract and would arise thereunder.
The judgment in the former action would not be a bar to an action for the recovery of money due to plaintiff under either contract at the time of the alleged breach, but the reason for that is that the right to recover such moneys would constitute a separate cause of action, which might have been joined in the same complaint, but could be presented separately. (Perry v. Dickerson, 85 N. Y. 345.) An action for moneys due could be maintained consistently with the continuance in force of the contract, but an action for a wrongful discharge proceeds upon the ground of total repudiation by defendant of further liability on the contract arising in the future, and plaintiff's election thereon to regard the contract as terminated. (Perry v. Dickerson, supra.) It necessarily follows that plaintiff was obliged at his peril to recover in the former action all his damages resulting from a total repudiation of the second contract, which included the right, if any, to commissions under or pursuant to that contract, to be paid in the future. The fact that the principal part of the service in obtaining such renewal commissions had already been performed by plaintiff does not, I think, take the case without the rule, for it is evident that the amount of renewal premiums that would be paid in the future would depend largely on the ability and diligence of the manager in soliciting the continuance of the insurance. By the wrongful discharge, plaintiff was deprived of that opportunity, and the services to the extent they were rendered in that regard must have been performed by another or others. At the time of the former trial, the amount of plaintiff's damages through loss of such renewal commissions may have been somewhat speculative, but not as much so as his loss of renewal commissions on new insurance that he might have written. There would, therefore, have been no greater difficulty in proving the one than the other, and if there were his cause of action was for being wrongfully deprived of the benefits of the second contract, which included these damages, and he might have waited before bringing the action, until such time as he could prove and recover all his damages.
I vote for affirmance.