APPEAL from the Circuit Court of Will County; the Hon THOMAS
W. VINSON, Judge, presiding.
MR. PRESIDING JUSTICE SCOTT DELIVERED THE OPINION OF THE COURT:
This case involved competing claims to an insurance record known as an "expiration." The case was heard in the Circuit Court of Will County under a stipulation of facts and issues. The dispute in the instant case is between Amgro, Inc. (hereinafter Amgro) and Economy Fire and Casualty Company (hereinafter Economy).
On August 17, 1965, Economy and Lincoln Realty, an investment corporation, entered into an agency agreement which provided in part as follows:
"In the event of the termination of this agreement, provided the agent shall pay to the company immediately all premiums for which he may be liable, the agent's use and control of expirations shall remain his property and be left in his absolute possession otherwise the use and control of expirations shall be vested in the company." (Emphasis added.)
On August 27, 1974, George F. Manikas and Shirley L. Manikas, for a consideration of $60,000 executed and delivered a promissory note to Amgro in the sum of $60,000. This loan enabled Mr. and Mrs. Manikas to purchase all of the assets of Lincoln Realty, an investment corporation, which purchase included all of the expirations owned by Lincoln Realty, an investment corporation. To secure the note the purchasers executed a security agreement and financing statement to Amgro, pursuant to and in compliance with section 9-101 of the Uniform Commercial Code (Ill. Rev. Stat. 1977, ch. 26, par. 9-101 et seq.). Both the security agreement and the financing statement recited that the collateral should include all furniture and fixtures, accounts receivable, records and expirations of Lincoln Realty and Insurance, plus all additions and accessions thereto. At a time approximately contemporaneous with the execution of the financing statement, Economy entered into an agency agreement with George M. Manikas, doing business as Lincoln Realty and Insurance. The substance of this second agency agreement was identical to the previous agency agreement entered into with Lincoln Realty, an investment corporation.
Subsequently, on November 1, 1974, George F. Manikas, doing business as Lincoln Realty and Insurance, sold his general insurance agency business, including all insurance contracts and expirations thereof, to Richard A. Johnson, the defendant herein. This sale was expressly subject to the security agreement executed in favor of Amgro. Mr. Johnson then transferred all of the assets to First Security Realty and Insurance Agency, Inc. (hereinafter First Security). In March of 1977 Economy and First Security entered into an agency agreement, which was identical to the two agency agreements previously mentioned.
On June 13, 1977, First Security was in default to Economy in that Economy was not paid premiums due on the policies it had issued through the First Security agency. Because of this nonpayment, Economy terminated the agency agreement of First Security on June 13, 1977, and notified First Security of that termination.
On July 26, 1977, Amgro filed a complaint for injunction against Mr. Johnson and Mr. and Mrs. Manikas. Amgro's complaint stated that the note executed by Mr. and Mrs. Manikas was in default and requested that the court order the collateral which secured the note be turned over pursuant to the terms of the note and security agreement. Economy was not made party to these proceedings nor served with summons or other court process. On August 1, 1977, the Circuit Court of Will County entered a temporary restraining order against Mr. Johnson and First Security with regard to selling, giving away, or disposing of any assets of the insurance business of any of the defendants. The court ordered that the temporary restraining order would remain in effect until August 8, 1977.
On August 10, 1977, the circuit court issued a mandatory injunction order against First Security requiring it to turn over all of the books, premiums, records, policies, ledgers and furniture comprising the entire business of First Security to Amgro's attorney. The injunction order included the agency's expirations.
On October 7, 1977, Economy filed its petition to intervene and on October 11, 1977, the petition was allowed. Economy sought a temporary injunction to prevent Amgro from transferring or disposing of the insurance agency's expirations. On December 19, 1977, a hearing was held pursuant to the stipulation of facts and issues signed by counsel for all parties. Arguments were heard and on December 21, 1977, the circuit court handed down its opinion. That opinion held that the Amgro note and security agreement were subject to the pre-existing Economy agency contract, and that Amgro's ownership claim to the expirations was subject to the agent not being in default to Economy at the time the agency contract was cancelled. However, the court went on to hold that because Economy made no apparent effort to secure the expirations until it filed its intervening petition on October 7, 1977, and before this by inaction allowed Amgro to take the expirations and dispose of same, that therefore Economy was not the owner of the sole interest in the expirations of the Economy policies, but rather that the interest of Economy was limited to the amount of premiums due from the agency at the time of the cancellation of the agency agreement. On appeal the appellant, Economy, contends that it ought to be the sole owner of the expirations, and the cross-appellant, Amgro, contends that Economy ought not have any interest in the expirations.
The court is asked to determine whether the circuit court correctly held that Amgro's interest in the expirations is subject to Economy's interest therein and whether the circuit court correctly held that Economy's interest was circumscribed by inaction.
We first consider the legal consequences of Economy's inaction for several months during the summer and early fall of 1977, but not before a brief discussion by way of background on the subject of this dispute. The record in the insurance business commonly referred to as an "expiration" has a definite meaning not only in the industry but in the law.
"The record known in insurance circles as expirations is in effect a copy of the policy issued to the insured, which contains the date of issuance, name of the insured, expiration, amount, premiums, property covered and terms of insurance. This is made by the agent at the time of the issuance of the policy on a blank form furnished by the company. A copy of same is sent to the company." (F.B. Miller Agency, Inc. v. Home Insurance Company (1934), 276 Ill. App. 418, 425.)
These expirations constitute a valuable asset of any insurance agency for the reason that policy-holders have the well-known disposition to accept policies offered to them in renewal of, or in lieu of, expiring policies. This valuable asset is in the nature of a customer list, an intangible property right. However, expirations are more than simply a list of customers. The term "expirations" connotes not only physical records of an insurance agency relative to various policy-holders but ...