Union Cent. Life Ins. v. Berlin

90 F. 779, 33 C.C.A. 274, 1898 U.S. App. LEXIS 1736

• Court: Court of Appeals for the Sixth Circuit
• Decided: November 28, 1898
• Docket: No. 597
• Status: Published

Opinion

CLARK, District Judge,

after making the foregoing statement, delivered the opinion of the court.

In the court below and here counsel for plaintiff in error and 'defendant in error conceded, and indeed have argued, that so much of the verbal agreement between Marmon and Berlin for the renewal of ihe second note as required the payment of one-half of the amount due to Maimón personally is contrary to law and invalid, as tending to subserve the personal interests of the agent while acting on behalf of his principal, and as tending to place the agent in a position of antagonism to the best interests of the principal. The law, on grounds of public policy, demands the utmost loyalty from agent to principal at all times, and does not permit the agent, by reason of his personal interests or otherwise, to assume an attitude in conflict with the very best interests of his xudncipal. “The policy of the rule,” says Chancellor Kent, “is to shut the door against: tenqrtation, and which, in flu- cases in which such a relationship exists, is deemed to be of itself sullieient to create the disqualification. This principle, like most others, may be subject to some qualification in its application to particular cases; but, as a general rule, it appears to be wed settled in the English and in* our Amoscan jurisprudence.” 4 Kent, Comm. (12 th Ed.) p. 438, and (uses in note.

The principle will also be found stated and applied in cases like Michoud v. Girod, 4 How. 554; Hoffman v. Insurance Co., 92 U. S. 161; Park Hotel Co. v. Fourth Nat. Bank, 30 C. C. A. 409, 86 Fed. 742; City of Findlay v. Pertz, 31 U. S. App. 340, 13 C. C. A. 559, 66 Fed. 427. Counsel, however, while agreeing that the provision of the verbal contract requiring a cash payment to Marmon was invalid, entertain very different views as to the effect of the admitted illegality of this provision of the contract. For plaintiff in error it is insisted that the contract as a whole is illegal, while for the appellee the contention is that the invalid simulation is to be eliminated from the contract, leaving the remainder of the agreement valid and in itself a complete contract of renewal, although it was contemplated that the cash payment was to be made and a renewal note formally executed.

In this state of the case, we proceed to determine the question thus raised, treating the particular condition requiring a money payment to Marmon as invalid, as has been done throughout the case, both in the court below and in this court. In the charge to the jury the court said:

•T am of the opinion, therefore, and charge the law to be, that if Marmon had the authority to make the agreement, the more failure to sign and execute the renewal note did not forfeit this policy, but on and after the 15th of -Tuly the contract between the insurance company and the policy holder stood precisely as if Berlin had executed and delivered a renewal note according to the terms of the agreement to renew,—that is to say, a new note for the same time, and bearing the same interest, and the same stipulations as to forfeitures and payment of interest, and the payment of the note out of the proceeds of the policy, as are coni aimed in the old note; and, for a more practical understanding of the matter, I am willing to say that the company held the old note extended by the agreement to renew for the same length of time, according to its stipulations. In other words, the note of July 15th was renewed in fact and extended for the same time the old note bore.”

That part of the instruction immediately following this paragraph, to which exception was taken and on which error is assigned, was in this language:

“And I am further .of the opinion, and charge the law to be, that the condition precedent attached by Marmon to his agreement to renew, that Berlin should pay a part of the debt he owed him for advances made in- his behalf, was a void condition so far as relates to the agreement of renewal, had nothing to do with the insurance company, was not binding on it one way or the other, and Marmon had no right to enforce the condition by refusing to renew the note for noncompliance with it. He had no right to use the stipulations of forfeiture contained in the policy as security for his private debt, and therefore we may lay that condition entirely out of the consideration of this case as immaterial.

“If the court is correct in these rulings, we have the condition existing that on the 15th of July, when the second premium note fell du.e, it was in fact renewed by the agreement between Marmon and Berlin for a new term, as to time of the same length as the old note, and the day of payment and forfeiture was extended accordingly.”

In this instruction there was error. It is obvious that the result of this view would be not to give effect to the contract as actually made and understood by the parties, but to make for them a new and different contract, not contemplated by either party. It is hardly necessary to say that a court cannot make a new contract for parties, nor can it destroy the substance of the one which they have actually made, and at the same time preserve the contract obligation. The courts are without power to absolve men from their legal engagements or to make contracts for them. The condition requiring a money payment to Marmon was the sole consideration for the agreement to renew, and was a material, essential term of such agreement as made, and was indivisible. The promise to renew and the condition requiring payment of the money as the consideration were clearly provisions that were interdependent, the one being the consideration for the other. The test is, did a failure to perform on Berlin’s part "go to the root of the whole and substantial consideration for the other party’s promise”? The transaction is not one where a good part of the consideration can be separated from that which is bad, and the consideration is neither severable nor apportionable. The contract, being entire, can be enforced only in its entirety, and the failure to perform a material part is a complete discharge of the other party from his obligation to perform. Dennehy v. McNulta, 30 C. C. A. 422, 86 Fed. 828, and cases cited; Cockley v. Brucker, 54 Ohio St. 214, 44 N. E. 590, and cases cited; Jones v. U. S., 96 U. S. 24; 2 Kent, Comm. (12th Ed.) p. *466; 7 Am. & Eng. Enc. Law (2d Ed.) 95.

It will be observed that, in the result at which the circuit court arrived, the contract to renew the second note was, in effect, declared divisible, the entire consideration on which it rested put aside as illegal and void, and the verbal executory agreement declared obligatory, regardless of the illegal consideration, and also equivalent to a formally executed renewal of the note. The error in the instruction referred to requires a reversal of the judgment, and we express no opinion upon the other questions discussed, as the evidence on a new trial may be different. For the error indicated the judgment is reversed and the case remanded, with a direction to set aside the verdict and award a new trial.