Shunga Plaza, Inc. v. American Employers' Insurance , 204 Kan. 790 ( 1970 )

The opinión of the court was delivered by

Hatcher, C.:

This appeal stems from a controversy over the deletion of an item of property from an insurance policy.

The facts are not in dispute.

Robert J. Bemica and Dana K. Anderson and their wives owned properties located at 1122 Van Burén and at 216 Huntoon, both in Topeka, Kansas. The defendant, American Employers’ Insurance Company, issued its insurance policy insuring the house at 1122 Van Burén in the sum of $4,000.00 and the house at 216 Huntoon in the sum of $8,000.00. It is agreed that the policy provided insurance protection against loss by tornadoes.

On or about February 4, 1966, both properties were conveyed to plaintiff, Shunga Plaza, Inc. The insurance policy was assigned to this corporation with defendant’s consent. The policy premium had been paid in full. The policy period was to begin November 29,1965, and expire November 29,1966.

Shunga Plaza, Inc. consisted of three stockholders who were directors, namely: Dana K. Anderson, Robert J. Bernica and J. W. Hannah. Hannah was president and Mr. Bernica was secretary-treasurer.

The assets of the Shunga Plaza corporation consisted of the above-described properties and an unimproved lot.

Robert E. Gucker was the insurance agent who handled the insurance in question. He had sold the original policy and handled the later endorsement for defendant.

The American Savings Association of Topeka, one of the plaintiffs, was named in the mortgage clause of the policy as the holder of a mortgage on the houses. The policy had the usual loss-payable clause to protect the mortgagee.

A representative of defendant inspected the insured premises, and because of the condition of the house at 1122 Van Burén, decided it should cease coverage of that house. Accordingly, Gucker computed the amount of refund due Shunga Plaza at $20.00. He prepared, and on or about February 23, 1966, mailed to Mr. Bernica an endorsement to the original policy. The endorsement reduced the coverage from a total of $12,000.00 to a new coverage of $8,000.00 and deleted item # 1, the $4,000.00 coverage on the house at 1122 Van Burén, from the policy.

Copies of the executed endorsement were then mailed by Bernica to Gucker, and were received in the mail by the latter. Gucker mailed an executed copy of the endorsement to the plaintiff, American Savings Association, which association received a copy bearing the signature of “Shunga Plaza, Inc., by Robert J. Bernica,” and placed the same in its file with its security papers. The American Savings Association received a copy of the endorsement between February 23, and March 8, 1966, the exact date being unknown.

On March 8, 1966, Gucker executed his company check in the sum o£ $20.00 payable to Robert J. Bernica. This check was mailed to Bernica in the usual and ordinary course of business from Gucker’s office by United States mail. The check has not been presented for payment and has not cleared the bank. This fact did not come to the attention of Gucker until after June 8, 1966. The check was not received by Bernica.

On June 8, 1966, the house at 1122 Van Burén, Topeka, Kansas, was totally destroyed by a tornado.

On June 8, 1966, the American Savings Association, plaintiff, held a mortgage on both the Van Burén and the Huntoon properties. Both properties were included in the same mortgage and the unpaid principal sum on that date was $11,501.08. This mortgage at the date of trial remained unpaid.

Shunga Plaza, Inc. and American Savings Association of Topeka brought an action to recover the $4,000.00 for which the property at 1122 Van Burén was originally insured. They contended that the property had never been deleted from the policy.

The trial court concluded:

“The alteration of the original rights and obligations of the parties to this agreement was contained in an endorsement to the original policy. This endorsement was clear and unequivocal. This is simply a new agreement as to a portion of the coverage afforded by the policy. When this endorsement was ‘signed and accepted’ by Shunga Plaza, through its authorized officer, Mr. Bernica, it became a contract. This was a bi-lateral contract between the parties as to the new relationship created.

“What we have here is a bi-lateral agreement created by the endorsement— this is simply a new contract. Coverage is deleted on the Van Burén property and defendant company owes Shunga Plaza the $20.00. Payment of the $20.00 is not a condition precedent to the effectiveness of the endorsement.”

The plaintiffs have appealed.

Before considering appellants’ contentions it would perhaps be helpful if we review briefly the exact transaction which we have before us for consideration.

The policy provided a method for cancellation. The provisions of the policy for cancellation were not followed—perhaps for the reason this did not purport to be a cancellation but was the deletion of a single item. We must, therefore, find a separate and complete agreement.

In 45 C. J. S., Insurance, § 444, p. 71, we find the following statement:

“. . . A method of cancellation provided for in the insurance policy is not necessarily exclusive so as to preclude an effective cancellation by mutual agreement without compliance with the method so provided, and a requirement of notice as a condition precedent to cancellation does not apply to a termination by mutual consent.” (See, also, Riddle v. Rankin, 146 Kan. 316, 69 P. 2d 722.)

The appellee desired to delete item # 1, the insured property at 1122 Van Burén, because of its condition.

An endorsement, standard in form, was mailed by Robert Gucker on behalf of the appellee to Robert J. Bernica, secretary of the appellant, Shunga Plaza, Inc., to be attached to the policy of insurance. The endorsement is too cumbersome to be presented in full. It was headed:

“ENDORSEMENT

(To be attached to policy)”

It stated:

“Attached to and forming part of Policy No. A 22-10385-62

“Effective Date of Endorsement 2-23-66”

The endorsement gave the amount of the return premium— $20.00. The following was typed at the bottom of the printed form:

“In consideration of return premium of $20.00. It is understood and agreed that item $ 1 is deleted from this policy.

Signed and accepted X_”

Written in the blank space following the X was:

“Shunga Plaza, Inc.

By: Robert J. Bernica”

The endorsement with copies were mailed to Robert J. Bernica with a letter of transmittal, which read:

“Please sign and return all copies where the X is indicated. Please be sure and sign Shunga Plaza, Inc., by you. Please find enclosed a stamped, self addressed envelope and return promptly.

“A check for the return premium will be sent to you when we receive confirmation from company.”

The appellants first contend that the trial court erred in its conclusion that the endorsement created an enforceable bi-lateral contract for the reason that there was failure of consideration.

We see no merit in the contention. The endorsement clearly stated it was to be effective February 23, 1966, which was about the time it was mailed to Bernica on behalf of Shunga Plaza, Inc. This was in consideration of the return premium of $20.00. When Mr. Bernica signed the company’s name to the endorsement and mailed the signed copies to Mr. Gucker, the agreement to delete the property at 1122 Van Burén from the policy was complete and binding. The appellee was then obligated to pay the $20.00 return premium. The fact that the check for $20.00 was not delivered in the due course of the mail did not reinstate the deleted insurance.

The receipt of the $20.00 was not a condition precedent to the validity of the endorsement which deleted part of the coverage. As we have said, the endorsement was definitely stated to be effective February 23, 1966.

It is a general rule that a promise by one party is a sufficient consideration for a promise or an act by another. It is the promise and not the performance thereof that constitutes the consideration. These rules were considered in First Federal Savings & Loan Ass’n v. Thurston, 148 Kan. 88, 80 P. 2d 7, where we said:

“It is said in 12 Am. Jur., Contracts, § 113:

“ ‘Subject to qualifications, hereinafter stated, it is a general rule that a promise by one party is a sufficient consideration for a promise by the adverse party. . . .

“ ‘It is the promise, and not the performance thereof, that constitutes the consideration for the promise. Nonperformance of a promise which was the consideration for another promise does not constitute want of consideration, although it may be ground for an action for damages.’

“This also answers an argument made in the brief of appellee that plaintiff could have recovered against her husband for the balance due on the sale of the lot by suit on the original contract. The only recovery that could have been had against the husband on a breach of that contract by him would have been damages, and not the balance of the purchase price.

“In Kramer v. Walters, 103 Kan. 135, 172 Pac. 1013, it was held that—

“ ‘A binding contract can be made by mutual promises; each promise furnishes a sufficient consideration for the other.’ (Syl. ¶ 4.) (See, also, Peoples Exchange Bank v. Miller, 139 Kan. 3, 29 P. 2d 1079, and 6 R. C. L. 676.)” (p. 94.)

Appellants argue:

“It is too late to return the premium after the damage has been done. It should have been returned upon confirmation of the company [when the copies of the endorsement were returned] or at least within a reasonable time.

Assuming the validity of appellants’ argument, we cannot say that three months was an unreasonable time under the circumstances. The check for the $20.00 return premium was mailed at once. It was its loss in the United States mail that caused the delay. We do not have a situation here where the party intentionally causing the failure of consideration is attempting to enforce the provisions of the contract such as was present in the cases mentioned by appellant. (Union Gas and Fuel Corporation v. Teton Syndicate, 119 Kan. 236, 237 Pac. 908; De Forest Radio, Telephone & Telegraph Co. v. Standard Oil Co. of New York, 238 Fed. 346.)

The appellants contend that the trial court erred in its conclusion that a new contract was created by the endorsement. This is based largely on the contention that there was no meeting of the minds.

The case was tried to the court without a jury. The appellants introduced some evidence as to Mr. Bernicas expectations and impressions. However, the trial court, in a well written memorandum opinion, makes no reference to and bases no findings on such oral testimony. It found that:

. . This endorsement was clear and unequivocal. This is simply a new agreement as to the portion of the coverage afforded by the policy. . .

An unambiguous agreement is not subject to interpretation. When the intent of the parties is evidenced by a clear and unequivocal written agreement, the intention ceases to be an issue and the courts are bound by the agreement.

The endorsement states specifically the policy number, the name of the insurance company, the original amount of the policy, the new amount of the policy with the deletion, the total amount of the premium, the amount of the unearned premium and the effective date of the endorsement. There was also the mutual agreement to delete item # 1:

“In consideration of return premium of $20.00. It is understood and agreed that item jf 1 is deleted from this policy.”

There is no basis for construing such clear and unambiguous language. In Knouse v. Equitable Life Ins. Co., 163 Kan. 213, 181 P. 2d 310, we stated at page 216 of the opinion:

“. . . Where a contract is not ambiguous, the court may not make another contract for the parties; its function is to enforce the contract as made. (State Highway Construction Cases, 161 Kan. 7, 166 P. 2d 728; Watkins v. Metropolitan Life Ins. Co., 156 Kan. 27, 131 P. 2d 722; Movitz v. New York Life Ins. Co., 156 Kan. 285, 133 P. 2d 89; and Gorman v. Fidelity & Casualty Co. of New York, supra [55 F. 2d 4].” (See, also, Braly v. Commercial Casualty Ins. Co., 170 Kan. 531, 538, 227 P. 2d 571.)

Also in Anderson v. Rexroad, 175 Kan. 676, 266 P. 2d 320, we stated:

“. . . The established rule is that the intention of the parties and the meaning of a contract are to be deduced from the instrument where its terms are plain and unambiguous; that when the language is clear and unequivocal the meaning must be determined by its contents alone; that words cannot be read into a contract which import an intent wholly unexpressed when it was executed; and that the court may not make an agreement for the parties which they did not make for themselves (See West’s Kansas Digest, Contracts, § 143; Hatcher’s Kansas Digest [Rev. Ed.], Contracts, § 40). . . .” (p. 679. See, also, Blair v. Automobile Owners Safety Ins. Co., 178 Kan. 615, 617, 290 P. 2d 1028.)

The appellants challenge the trial court’s finding that Mr. Bernica had authority to cancel insurance on behalf of the appellant, Shunga Plaza, Inc.

On this issue the trial court found:

“Mr. Bernica, as secretary-treasurer of Shunga Plaza, had and exercised authority to write checks, receive rents, handle insurance matters for the corporation. Plaintiffs claim Bernica was required to have a corporate resolution to handle this insurance matter; the evidence is that this is a loosely operated corporation and the board of directors never met anyway. Mr. Bernica certainly had authority to handle insurance matters for the corporation, in fact, as well as impliedly.”

• Part of Mr. Bemica’s testimony is summarized in the record as follows:

“. . . Mr. Bernica could not recall whether there were any business meetings held in January, February or March of 1966. There was no corporate resolution when the insurance policy was transferred to the corporation in January of 1966, and there was no corporate resolution authorizing Mr. Bernica to sign the Endorsement. At the time of the loss involved herein, any two of the three stockholders, the stockholders being Mr. Bernica, Mr. Anderson and Mr. Hannah, were authorized to write checks on a co-signing basis. Mr. Anderson and Mr. Bernica collected the rents on the buildings involved herein and Mr. Bernica handled all insurance matters and transactions affecting funds.” (Emphasis supplied.)

There being substantial evidence to support the trial court’s findings on this issue, we adhere to the well established rule that it is not the province of this court to weigh the evidence on appellate review.

The authority to release corporate rights may be inferred from past conduct of the corporation or the corporation may be bound by an agent acting within the apparent scope of his authority. (19 Am. Jur. 2d, Corporations, § 1193, p. 614.)

In Thresher Co. v. Implement Co., 103 Kan. 532, 175 Pac. 392, we held:

“While a secretary of a corporation ordinarily has not authority by virtue of his office to bind his corporation, the corporation may be bound by his acts when it intrusts him with the management of its business, and where his acts are in furtherance of the corporate business.” (Syl. ¶ 2.)

A careful examination of the record discloses nothing that would justify our disturbing the judgment of the trial court.

The judgment is affirmed.

APPROVED BY THE COURT.