Opinion
Argued April 20, 1900
Decided June 5, 1900
John Notman and William Allen Butler for appellant.
William F. Cogswell and William N. Cogswell for respondent.
The general rule is that when an agreement is reduced to writing it, as between the parties, merges and overcomes all prior or contemporaneous negotiations and declarations upon the subject and that oral evidence is not admissible to vary, explain or contradict its terms, for the writing is conclusively presumed to contain the whole engagement of the parties. There are certain exceptions to the rule, which have grown out of efforts of the courts to prevent fraud and injustice in particular cases and which are sometimes so loosely applied, as this court said in Thomas v. Scutt ( 127 N.Y. 133), as to threaten the integrity of the rule itself, an outcome which the courts should be very careful to guard against; for all those who are charged with the administration of the law have almost daily forced upon them the importance of reducing agreements to writing and thereafter protecting them from oral assault owing to the imperfection of human memory and the tendency on the part of some to color their testimony in the direction of their interests. The exceptions to the general rule, as this court said in Thomas v. Scutt ( supra), may be grouped into two classes, one where parol evidence is received to show that that which purports to be a written contract is in fact no contract at all, and second, where the written instrument is recognized as valid, so far as it goes, but is treated as incomplete, such as receipts and writings that upon their face show that only portions of the agreement are embodied in the instrument. "Two things, however, are essential," said the court in Thomas v. Scutt ( supra), "to bring a case within this" (second) "class: 1. The writing must not appear upon inspection to be a completed contract, embracing all the particulars necessary to make a perfect agreement and designed to express the whole arrangement between the parties, for in such a case it is conclusively presumed to embrace the entire contract. 2. The parol evidence must be consistent with and not contradictory of the written instrument." And again, in the course of the same opinion, it was said: "You can no more add to or contradict its legal effect by parol stipulations preceding or accompanying its execution than you can alter it through the same means in any other respect." Collateral agreements are not regarded as entitled to classification with the exceptions to the general rule, for the reason that they are separate, independent and completed contracts. They may be proved by parol because they rest in parol. But the caution suggested by the Supreme Court of the United States in Seitz v. Brewers' Refrigerating Machine Co. ( 141 U.S. 510) should not be lost sight of. That court, after recognizing the fact that there may be existing and separate oral agreements as to matters on which a written contract is silent, provided they be not inconsistent with the terms of the writing, said: "Such an agreement must not only be collateral, but must relate to a subject distinct from that to which the written contract applies; that is, it must not be so closely connected with the principal transaction as to form part and parcel of it. And when the writing itself, upon its face, is couched in such terms as import a completed legal obligation without any uncertainty as to the object or extent of the engagement, it is conclusively presumed that the whole engagement of the parties, and the extent and manner of their undertaking, is reduced to writing."
The plaintiff's contention is that his judgment of five thousand dollars properly rests upon the breach of an oral agreement, which his counsel asserts is collateral and suppletory to the written agreement which, upon its face, bears every evidence that the parties intended it as the repository of all their negotiations and agreements as to the agency. The written agreement contained ten articles, the first of which contains the names of both parties and the date; the second, the appointment by the defendant of the plaintiff as its general agent to effect insurance within prescribed territory, and conferring on him the authority to appoint sub-agents "subject to approval of and to be commissioned by the" defendant; articles third and fourth contain the engagement of this plaintiff to appoint sub-agents, pay the expenses incident thereto, and to diligently enforce the defendant's instructions; by article five the defendant agreed to furnish all necessary agency supplies and to pay expenses incurred in adjusting losses, together with such charges by the sub-agents as the defendant should allow; articles six and seven provide that the plaintiff should render a just and true weekly and monthly account of premiums on all policies or renewals thereof, and that he should comply with any and all instructions given to him by the defendant; article eight contains the defendant's promise to pay the plaintiff a ten per cent commission on net gross premiums, while by article nine the plaintiff agreed to remit and pay over monthly all moneys remaining in his hands. As neither of the parties desired to have the contract binding for a fixed time, both agreed that either party should be at liberty to terminate it; and by the tenth article was provided the method by which such termination should be accomplished; and in order to avoid any misunderstanding whatever, it was expressly provided that there should be no liability on the part of the defendant should the contract be terminated. As this article has an important bearing in determining whether the plaintiff's alleged oral agreement was independent and collateral, so much of it as bears upon the subject that I have referred to is herewith quoted: "It is hereby further understood and agreed by and between the parties hereto that this contract may be terminated at any time by either party giving ninety (90) days' notice thereof in writing and without any liability on the part of said The Greenwich Insurance Company beyond the commissions aforesaid actually earned at the closing of said agency. But any or all of said sub-agents may be discontinued by the said The Greenwich Insurance Company at any time." Notwithstanding the provision in the written agreement that the termination of the contract by either party in the manner provided in article ten should be "without any liability on the part of said The Greenwich Insurance Company beyond the commissions aforesaid actually earned at the close of said agency," the plaintiff has been permitted to recover a judgment of five thousand dollars as compensation for the damages sustained by the plaintiff upon its termination, upon the theory that there was "another parol, independent agreement which affected the rights of the parties only when that written agreement had ceased to exist."
We come now to an examination of the testimony touching the negotiations preceding the execution of the contract, which one of the parties insists became merged in the writing, while the other claims that a portion of those negotiations constituted an independent, collateral agreement, the effect of which was to render the defendant liable in damages upon its termination of the contract, notwithstanding such contract provided that there should be no liability except for commissions actually earned. The plaintiff, as the general agent for two insurance companies, had established agencies in a portion of the territory of the states of New York and Pennsylvania, receiving for all policies and renewals issued by them a certain percentage of the premiums paid, and his agency being terminated by one of the companies, he sought to obtain the agency of another company and did in fact become the general agent of two other companies. In his behalf he interested Dr. Foote, who interviewed Colonel Stone, then the secretary of this defendant, with such favorable results that Dr. Foote at once advised the plaintiff to come to New York, and some time in the forenoon of the twenty-seventh of December they called upon Colonel Stone, at the place of business of the defendant, where, after an interview in which the plaintiff complained of the treatment that he had received from the Clinton Insurance Company, he asserted, according to his present recollection, that he would not enter into a contract with another company unless in the event of the termination of the contract the business brought into existence by him during his agency and the agencies reporting to him should not be taken away, after which he withdrew in order to give the officers of the defendant an opportunity to determine whether his request to become their general agent would be accepted. After lunch on the same day the plaintiff, accompanied by Dr. Foote, went again to the defendant's offices, when they were at once informed by Colonel Stone that the defendant had decided to give to Mr. Stowell the general agency for the territory solicited by him, to which Mr. Stowell replied "All right." The form of the contract was next considered, and for that emergency the plaintiff was well provided, for his friend Dr. Foote had in his possession the contract between the plaintiff and the Jersey City Insurance Company, and the plaintiff had the contract between the Clinton Insurance Company and himself. Dr. Foote produced the contract between the Jersey City Insurance Company and the plaintiff, handed it to Colonel Stone, at the same time saying, according to his testimony: "That is satisfactory to me if it is to you," to which Colonel Stone replied that it was satisfactory to him. Later the plaintiff testified: "I told Colonel Stone at the first interview that I would sign a contract of that kind on condition that if it was terminated the agency and renewals should be left to me, and he said it was satisfactory to him, and I said it was satisfactory to myself." The plaintiff's contract with the Jersey City Insurance Company was left with Colonel Stone, with the understanding that the new contract was to be like it, with the exception of the change in names, parties and dates, and that understanding was completely carried out. While the contract bears the date of December 31st, it was not in fact executed until January 11th, at which time, the plaintiff testified, nothing was said about the termination of the contract. There was other evidence corroborating plaintiff in so far as he testified to the effect that he insisted in two conversations that the agents and the renewals of the business should be left with him upon the termination of the contract; on the other hand, it was denied by Colonel Stone; but it will serve no useful purpose to refer to it, as the evidence of the plaintiff to which I have referred brings out the point, and shows that the plaintiff had in person three interviews with Colonel Stone prior to the execution of the contract, and that in two of those interviews he put forward the claim that the business builded up under his agency should belong to him at the termination of the contract.
In the first place it will be noted that whatever was said upon the subject was said in the three interviews had between the parties for the purpose of bringing about an agreement by which the plaintiff should obtain the agency which he solicited from the defendant, and, therefore, is within the general rule which presumes that all prior negotiations are merged in the written agreement. That rule unaided calls for the exclusion of the testimony offered in behalf of the plaintiff with a view of proving an alleged, collateral, oral agreement. But in addition to the fact that what was said on the subject preceded the written contract and formed a part of the negotiations resulting in the meeting of minds upon the basis expressed in writing later, the so-called oral agreement was not independent and collateral. It does not deal with an independent subject, but instead with one which the contract covers — a contract executed in the form proposed by the plaintiff. Now, these subjects were fully covered by the contract which he proposed for execution; it provided that while the plaintiff should solicit the agents, they were not only to be subject to the approval of the defendant, but to be commissioned by it, whereupon they necessarily became the defendant's agents. Article two of the contract so provided and by article ten the defendant reserved the right to discontinue at any time any or all of the said sub-agencies. The agents were, therefore, the agents of the defendant, having power within the limits of the authority of a sub-agent to bind the defendant, the defendant having the right to commission them or not, and to discontinue them at will; the contract should have provided for their discontinuance by the defendant at the termination of the contract if that was the intention of the parties, but instead of that it was provided that there should be no liability on the part of the defendant in such an event except to pay commissions. Now, it is urged that the defendant is liable because it did not discontinue the said agents. Without pursuing this subject further, it is sufficient for my present purpose to call attention to the fact that the general subject of agents, how selected by the plaintiff and the matter of their appointment and removal by the defendant, was reduced to writing and included in the contract which purports on its face to embrace all the negotiations of the parties. Beyond all that, the contract recognizes that it might not prove to be for the best interests of the parties that the contract should run on indefinitely, and so a method of termination was provided in respect to which both parties were placed on an equality, and, in order that there might be no misunderstanding as to the rights of the parties to the agreement, it was provided that the termination of the contract, no matter which one of the parties brought it about, " should be without any liability on the part of said The Greenwich Insurance Company beyond the commissions actually earned at the close of the said agency." This was the deliberate engagement of the parties, and by it they attempted to close the door against all possible claims for services or damages, and to absolutely destroy all opportunities for controversy. An oral agreement that reaches another result and imposes a liability upon the defendant for renewing policies originally issued through the sub-agents and for not discontinuing agents appointed by authority of the contract, does not (in the language of authority) "relate to a subject distinct from that to which the written contract applies." Indeed, the situation compels us to go further and say that the alleged oral agreement not only varies the contract, but it explicitly contradicts that portion of it which declares that upon the termination of the contract there shall be no liability on the part of the defendant except for commissions earned.
The question was raised by objection to the admission of testimony, followed by a motion to strike it all out after the testimony was in.
The judgment should be reversed and a new trial granted, with costs to abide the event.
O'BRIEN, BARTLETT, HAIGHT, MARTIN, VANN and LANDON, JJ., concur.
Judgment reversed, etc.