Court Opinion

ID: 7817978
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:43:12.395298+00
Date Added: 2024-06-11T16:30:39.198099
License: Public Domain

John A. Fogleman, Justice, dissenting. I share the views expressed by the Chief Justice. The contract involved was clearly one giving a controlling or preemptive right to an agency manager to produce substantially all insurance business for the insurer. I feel that I should express my views on the means by which the majority reach a result permitting recovery under this contract. If the statute in question were designed only for protection of insurance companies, I would not feel so alarmed by a result which leads to its easy circumvention. Obviously, this statute was designed not only to protect uninformed investors but, more importantly, to safeguard the rights of unsuspecting policy buyers. The latter are the more innocent victims of a ruined insurance company. The ruin can as readily come by solicitation of poor risks and by payment of excess commissions as by any other means. While this particular sittiation may not have culminated in such an unhappy conclusion, the statute is designed to avoid such a result. Now, it seems of little value. I do not agree that recovery can be had under quantum meruit on a contract prohibited by statute, as such a contract is void. A contracting party is allowed to retain, not recover, the reasonable value of goods and services under an executed contract when a prohibitory statute does not declare the contract void, or under a contract which is voidable but not void. Gantt v. Arkansas Power & Light Co., 189 Ark. 449, 74 S. W. 2d 232; Smith v. Dandridge, 98 Ark. 38, 135 S. W. 800. While it is true that quantum meruit recovery has also been allowed for goods or services furnished to a city under a contract not formally authorized according to statute, this is done on the basis that acceptance constituted ratification of the contract. Forrest City v. Orgill, 87 Ark. 389, 112 S. W. 891. This contract could not have been ratified without approval by the Insurance Commissioner, and no question of ratification is involved. I find no basis for application of Hanauer & Co. v. Gray, 25 Ark. 350. There the promise was to pay in Confederate or Tennessee funds. The contract was held, in Í869, enforceable as to payment in the latter. It must be kept in mind that the insurance company promised to pay Pioneer commissions on all renewals of business, in force, as well as commissions on new business written after June 8, 1964, regardless of whether the applications were taken by Pioneer or the business developed by the company. All new business written by the company’s agents was to be turned in or forwarded to Pioneer. Thus, it can hardly be said that the contract is divisible. 'The language of the court in Ensign v. Coffelt, 102 Ark. 568, 145 S. W. 231, is applicable here. There we said: “* * * It is well settled, we think, that, if a contract is based upon several considerations, some of which are merely insufficient and not illegal, it is not void but may be upheld by the consideration which is sufficient; but if one of several considerations of an entire contract, as a note, is illegal, the whole contract is void. In other words, where the contract is entire, and a part of the consideration thereof is illegal, and the illegal portion is not separable from the whole consideration, then the whole contract is unenforceable. 1 Parsons on Contracts, § 455; 1 Daniel on Negotiable Instruments, § 204; Edwards v. Randall, 63 Ark. 318; Hanauer v. Gray, 25 Ark. 350; Tucker v. West, 29 Ark. 386; Kizer v. Texarkana & F. S. Ry. Co., 66 Ark. 348.” An even closer parallel is found in Bourland, Mayor v. First National Bank Building Co., 152 Ark. 139, 237 S. W. 681. There, the city took bids for designation of a city depository. Not only were the bidders required to state the rate of interest the city would pay on city funds, but the rate at which they would lend money to the city. The Constitution of Arkansas prohibited a city from issuing interest-bearing evidence of indebtedness. The court declared that the purpose of this provision was to protect the people from abuse of the public credit. We there said: “It is well settled that if any part of the entire consideration for a promise or any part of an entire promise be illegal, whether by statute or by the Constitution or from considerations of public policy, the whole contract is void. Kuhn v. Buhl, 251 Pa. 348, 96 Atl. 977, Ann. Cas. 1917D, 415, and cases cited; Hazelton v. Sheckells, 202 U. S. 71, 26 Sup. Ct. 567, 50 L. Ed. 939, 6 Ann. Cas. 217. Where there are provisions in a contract for a compensation which is legal, still if they are blended with those which are forbidden, the whole is a unit and indivisible. The above is the language of Mr. Justice Swayne in Trist v. Child, 21 Wall. (88 U. S.) 441, 22 L. Ed. 623. The learned justice added that that which is bad destroys that which is good, and they perish together. Where the lawful and unlawful parts of a contract cannot be separated so as to enforce the one and annul the other, it is an indivisible contract and therefore null and void throughout. Edwards v. Randle, 63 Ark. 318, 38 S. W. 343, 36 L. R. A. 174, 58 Am. St. Rep. 108. And in that case the court quoted with approval the following: ‘If any part of an indivisible promise, or any part of an indivisible consideration for a promise, is illegal, the whole is void.’ ” I do not see how the contract here involved can be divided. It can hardly be said that the rates of commissions were unrelated to the agency management agreement giving commissions to Pioneer on all business theretofore or thereafter written.