Hudson v. Compere Bros.

This case is thus stated by the Court of Civil Appeals:

"Compere Brothers were local insurance agents at Abilene, Texas, representing nonresident fire insurance companies, among which was the Fort Wayne Insurance Company of Fort Wayne, Ind., which was acting under due permit to do business in this State. Compere Brothers, as such agents, solicited Isaac Hudson to take out insurance on certain gin property owned by him. The terms as to payment of premium having been stated by Compere Brothers to be cash and Hudson not having the cash with which to pay such premium, it was agreed that Hudson would insure said property as solicited; that Compere Brothers should, for him, advance to the company the cash necessary for the payment of the premium and in consideration of such advance accept Hudson's notes. The selection of the company in which such insurance should be taken was left to said agents. Compere Brothers thereupon, as agents, issued to Hudson a policy of insurance upon his said property in the company above named and forwarded to the company the cash (less commission) required as payment for the premium, in consideration of which Hudson executed and delivered to Compere Brothers two notes for $112.50 each, payable to appellees, maturing respectively October 23 and November 23, 1899, the same representing the amount of the required premium, both parties acting in good faith. But it appeared that within a short time after the policy was issued and the premium remitted as stated, said insurance company was placed in the hands of a receiver, it in fact being insolvent at the date of the issuance of the policy, but such insolvency was unknown to either Compere Brothers or to Hudson. No loss in fact occurred under the policy, but had there been one Hudson could have recovered nothing on his policy by reason of the insolvency of the company as stated.

"The cause was tried April 12, 1900, the policy expiring September 23, 1900. The permit to do business in Texas was revoked by the Insurance Commissioner of Texas on October 28, 1899, the policy and notes being dated September 23, 1899. At the maturity of said notes, Hudson having refused payment thereof, Compere Brothers instituted this suit in the County Court of Taylor County against Hudson to recover thereon. Hudson was duly made party defendant and pleaded in defense of the suit a total want and failure of consideration arising out of the insolvency of the insurance company as above stated. The trial below resulted in a judgment for Compere Brothers, which on appeal to this court, was affirmed upon a former date, and the cause is now pending before us on motion for rehearing.

"The sole question of law arising upon the facts stated and which we hereby certify to your honors, is: Did such facts support said plea of a total want of consideration and failure of consideration as against the premium notes mentioned in the hands of said original payees?"

There can be no doubt that there was a consideration for the note when it was given, and we think it equally clear that the consideration has not failed. The money advanced by appellants to pay the premium was a loan to appellee and for this the note was given. The contract of insurance was between appellee and the company and was completed by the payment of the premium and delivery of the policy. It has been held that a note given to an insolvent company for the premium on a policy is without consideration and can not be enforced. Insurance Co. v. Smith,63 Ill. 187. It may be conceded, for the sake of argument, that this is correct, and also that, under proper circumstances, the insured would have a cause of action against such company to recover back a premium actually paid, and still it would not follow that such an action would lie against an agent, through whose hands the premium had passed, after it had been paid over to the principal. With some exceptions not applicable here, the rule is that an agent receiving money for his principal and paying it over to him can not be made liable for its return, although the principal should be so liable. Story on Agency, 9 ed., sec. 300, and authorities cited in note.

It is also a general rule of the law that the agent is not personally bound upon the contracts made in the name of his principal. Story on Agency, secs. 261, 263 These principles control this question. Appellant borrowed the money from appellees with which to pay the premium and is therefore liable on the note, unless appellees are bound, because of the insolvency of the principal, to make restoration. The company being authorized to do business in this State, it and not its agents became bound upon the contract of insurance. Rev. Stats., art. 3095. The case stands precisely as if appellant had paid the premium to the agents and they had in good faith delivered it to the principal. The agents, in such case, would not be bound for the return of the money, and it follows that their right to recover upon the note is as good as would be that of any other person from whom appellee might have borrowed it. The contention that the agents should be held to have warranted the solvency of the principal is inconsistent with the principles stated.