WOLFE v. INTERNATIONAL FIRE INS. CO. OF FT. WORTH, TEX., 207 F. 262

PRITCHARD, Circuit Judge (after stating the facts as above). In order that we may discuss the questions involved herein in their logical order, we will first inquire as to whether there was a breach by the plaintiff of any covenant in the agreement made in 1910; that being the contract upon which this proceeding is based. The plaintiff in error will be referred to as “plaintiff,” and defendant in error will be referred to as “defendant”; such being the relative positions the parties occupied in the court below.

The covenants on behalf of the defendant company may be epitomized as follows: First, that the agent shall receive a commission of 32% per cent, for all premiums, less return premiums and reinsurances, collected for all business written in said territory; second, that the company will furnish blank policies and daily reports and pay all losses'and charges for taxes, legal'service, adjustments, etc.; third, that the contract shall continue in force for ten years with the privilege of canceling after two years if it should prove unprofitable.

After a careful consideration of the provisions of the contract, we are of the opinion that it does not contain an undertaking by the company to accept, and no authority to the agent to write, any particular class of risks: There is no reference in the agreement to this subject, and therefore we must assume that it was the purpose of the defendant company to reserve the right unto itself to determine from time to time as to the class of risks that the agent was to write, and it is but natural that the contract should have been written as it was, when we consider the nature of the business in which the defendant company was engaged, and the obligation that it owed to its stockholders and others interested in its financial welfare.

As we have stated, there is no covenant to the effect that plaintiff was to be permitted to write insurance of any particular class;, in other words, the contract is silent as respects this point, thereby indicating a purpose on the part of the parties thereto) to leave that question in the discretion of the defendant company.

Owing to the character of business in which the defendant company is engaged, it necessarily follows that its success depends in a large measure upon its ability from time to time to increase or diminish the number and character of policies it may issue, so as fi> properly meet existing conditions.

Therefore, in the absence of an express agreement on the part of the company to the contrary, it would be unreasonable to hold that it, was the intention of the defendant ■company in this instance to issue policies of every class whatsoever and not reserve unto itself the right to restrict those to be issued to' a particular class in the event it should in the future appear that the issuance of policies of a certain class would result disastrously, and thereby impair the financial ability of the company.

We are therefore of the opinion that the ruling of the court below as respects this phase of the question was eminently proper. However, it is also insisted by counsel for defendant that'the contract in this case has been rescinded, and that therefore in no event would an action lie for an alleged breach thereof, and, even if the contract was broken by the defendant, still the plaintiff would not have a cause of action for the breach thereof, because the plaintiff in the first instance elected not to sue for the breach, but to rescind the contract.

The court below in referring to this phase of the question said: “At the time the correspondence began the agent thought that the company had broken its contract. If that were so, he had a right, if he would, to treat the contract as still alive and to sue for the damages he had suffered by its breach. He was not required to do so. He might, if he preferred, rescind it. If he did the latter, he could demand back the consideration he had paid, repayment of money laid out by liim and compensation upon a quantum meruit for tlie services lie liad rendered.

If he elected to treat the contract in force, by suing for damages for Its breach, lie could not ask for the return of the consideration he had paid. The measure of damages for the breach of a contract; is tlie amount which would put the injured party in tlie same position as be would have been bad the contract been performed. He who recovers such damages is in theory of law placed in the same situation he would have been had no breach occurred.

To give liim back in addition the consideration ho bad paid to induce tlie other party to enter into the contract would be to give him all the benefits of the contract while relieving liim from all its burdens.” The court below held that the plaintiff had offered to rescind the contract, and that the defendant acquiesced therein.

It appears that on the 4th day of August, 1911, the defendant company after carefully considering the situation, “on account of the heavy fire loss,” instructed plaintiff “not to send us any new business or renewals from the date of the receipt of this letter, except risks of the preferred class, declining for us all special hazards and outside unprotected risks.” Thus the plaintiff was fully informed as to the course that the defendant company had decided to pursue, and the reason therefor, and after making further inquiry by letter dated August 10, 1911, demanded the exact cause which prompted the finance committee of the defendant company to make the recommendation it did, and on August 23, 1911, plaintiff’s attorneys wrote another letter, in which it was asserted that the defendant company did not have the right to fix any limitation as to the character of risks to be written, and, among other things, said: ‘•We have, therefore, advised him that the demand from your company to restrict his future business to the preferred class, as stated in your letter of August 4th, and its subsequent refusal to retain insurance written by him for risks other than the preferred class, as enumerated in your letter to him of August 18, 19J1, is practically a nullification of his contract of agent, amounting to a breach thereof, and entitles him to rescind the contract and demand the return of the consideration therefor as well as compensation for the losses he has sustained. “By reason of this breach of contract by your company in manner indicated, Air.

Wolfe has concluded to rescind same, and we hereby notify you of his rescission thereof and demand, oil his behalf, a return of the consideration therefor as well as full compensation for his expenditures and losses.” After the receipt of this letter, to wit, on the 26th day of August, 1911, the defendant company addressed a letter to the plaintiff, in which, among other things, the following language was used: “Assuming that you, as attorneys and agents for Mr. F. E. S. Wolfe, of your city, have the right to give notice to the International Irire Insurance Company, of Mr.

Wolfe's rescission of bis contract with that company, we accept your notice of such rescission.” A similar letter was addressed to the plaintiff, and the language emploj-ed therein is such as to leave no doubt as to its true meaning.

In the first place, the attorneys for the plaintiff clearly and concisely stated the reasons why they thought the contract should be rescinded, and then notified the defendant company that the same had been rescinded, and, in reply thereto, counsel for defendant advised the attorneys for the plaintiff that the notice of rescission had been accepted, and a copy of this letter was also “sent to the plaintiff. Here the correspondence as respects this matter ends.

If the plaintiff, when notified as to the action of his attorneys, had' felt that they had exceeded their authority in rescinding the contract, .he could have notified the defendant company that his attorneys had exceeded the scope of their authority in proposing to rescind the contract, but, instead of so doing, the plaintiff remained silent, and thereby assented to what had been done in the premises.

An inspection of the letters and other documentary evidence in this case forces us to the conclusion that the refusal óf the defendant company to permit plaintiff to write only the preferred class of policies was considered by plaintiff as a breach of his contract, and that he then and there deliberately elected to rescind the contract and to demand the return of the consideration which he had paid in the first instance. It? was for the court below, and not the jury, to decide as to whether upon the established facts there had been a rescission of the contract. In the case of Sea Insurance Co. v.

Johnston, 105 Fed. 286, 44 C. C.. A. 477, the correspondence between the agent and the company was very much like that of the case at bar, and there the court held that the court below acted properly in deciding that the correspondence between the parties constituted a rescission of the agreement. In that case the court, among other things, said: “On tire question under discussion—tlie question of rescission—there is no conflict in the legal evidence.

It depends upon the correspondence, with nothing needed to supplement it, unless, perhaps, the conceded fact of the acceptance and collection and failure to return the check inclosed in the letter of February 21st. The Circuit Court should have granted the request of the Sea Insurance Company, and directed the jury to find a verdict for the defendant.” When we consider the correspondence between the parties in this instance, we are clearly of the opinion that the same constitutes a rescission of the agreement, and, such being the case, it follows that an action of this character cannot be based thereon.

For the reasons stated, the judgment of the lower ‘court is affirmed. Affirmed.'