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Beidler & Bookmyer Inc. v. Universal Ins. Co.


March 6, 1943


Appeal from the District Court of the United States for the Southern District of New York.

Author: Frank

Before L. HAND, CHASE and FRNK, Circuit Judges.

FRANK, Circuit Judge.

As the insured had no contract with appellant, it could, without liability to appellant, arbitrarily exercise its privilege of cancelling the policy, although its sole purpose in doing so was to terminate appellant's right to earn future commissions under that policy.The letter of August 5, 1941, from the insured to appellee, if reasonably construed, meant that the insured would cancel the policy if appellee did not assent to the change of brokers. As it would be frivolous to make the rights of the parties turn on needless formalities, we think the situation is just as if appellee had received from the insured a formal cancellation notice and a request for the issuance of a new policy and as if appellee had immediately accepted both. Since appellee did not control the insured, and the insured ws under no obligation to appellant, the cancellation did not render appellee liable to appellant. As the policy was, in effect, cancelled on August 5, no premiums were thereafter earned thereunder, and therefore no commissions were due appellant; it had no contract with appellee as to the policy which existed after August 5, and performed no services after that date. Appellee was under no obligation to appellant to resist the instructions in the letter from the insured, or to question the latter as to whether and why it meant to insist upon the change of brokers. See Clinchy v. Grandview Dairy, 283 N.Y. 39, 27 N.E.2d 425; Degnan v. General Acc., F. & L. Assur., etc., Corp., 161 App.Div. 439, 146 N.Y.S. 360, affirmed 221 N.Y. 484, 116 N.E. 346.

There remains, however, the question of the so-called "good faith" of appellee. Appellee was obligated by its contract with appellant (a) not to exercise its privilege of canceling the policy for the sole purpose of getting rid of that contract and (b) not to induce the insured to cancel the policy solely to enable appellee to be rid of that contract. It is no answer that appellee had not agreed to be thus restricted. Such restrictions on "rights" need not always be a matter of agreement. True, once upon a time - and not so long ago - the word "contract" cast a curious spell on legal thinging.*fn1 It was then customary to say that, when men made a contract, they incurred no obligations except those which they actually intended, and that their actual intention must be found either in the explicit words of the contract or must be "implied" in those words. That assumption led to artificial and awkward reasoning. For instance, the courts developed the doctrine of concurrent conditions, although often the parties never intended such a result; in applying such and other kindred doctrines, it was said that, if the contracting parties had been reasonable men and had thought about the problem, they would have intended a result which plainly they never intended.*fn2 Actually, what the courts were doing in those and many other instances was this: They attached many legal consequences to the act of entering into a contract without regard to whether the parties had or had not actually intended such consequences. The ground for annexing such obligations is the same as that for annexing many obligations to those noncontractual acts which are called "torts," namely that the courts consider that it is "just," i.e., that it is wise policy to do so.*fn3 The policy derives from the judicial belief that society will be better off if those obligations are exacted, or, to put it differently, if certain kinds of conduct will lead to court decisions terminating in enforceable court orders in the form of injunctions, execution sales and the like.*fn4 Sometimes this process is described by saying (as we have said recently) that a contract creates a status or relation;*fn5 it is now generally understood that the "feudal contract" did so, and everyone agrees that the marriage contract now does so.Holmes wittily summed up this revised attitude towards nonintentional contractual obligations in the remark that one may "commit a contract" as well as a tort.*fn6 The policy considerations which yield such nonintentional obligations are not static, but grow or decline with shifts in judicial views as to what is socially desirable; usually the social reference is elliptically expressed by talking of what a "reasonable man" would deem fair and honest.*fn7 It is far more wholesome for the courts in the contract cases to spell out their mental processes, and frankly to acknowledge that such policy considerations are at work in their decisions, than to conceal that fact (from themselves and others) behind the fictitious postulate that they are carrying out the parties' intentions.*fn8 Holmes, who once spoke of "the humbug of talking about the intention of the parties,"*fn9 sagely urged, on many occasions, that there should be candid judicial avowal of the judicial policy-making, and "interstitial" judicial legislation, unavoidably involved*fn10 in many decisions.*fn11 In all provinces of thought it usually promotes intelligence to bring out into the light the concealed actual postulates of thinking.*fn12

Granting then that appellee owed appellant a duty not to bring about the destruction of appellant's right to commissions, the question here narrows down to this: Was there anything in the pleadings and affidavits before the trial judge which tended to show that, had he permitted the case to go to trial, there would have been evidence to support a finding that appellee induced the insured to cancel the policy in order to bring about the change of brokers. The only evidence suggested by appellee as having that tendency is that appellee's vice-president and the president of the insured were "regular luncheon companions" and "warm person friends." That was not sufficient to raise such an issue of fact as to require a trial, i.e., there was not a "genuine issue" as to a material fact under Federal Rules of Civil Procedure, rule 56(c), 28 U.S.C.A. following section 723c.

Judgment affirmed.

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