Baty v Protech Insurance Agency

• Decision Date: 29 November 2001
• Docket Number: No. 14-99-00201-CV,14-99-00201-CV
• Citation: 63 S.W.3d 841
• Parties: <!--63 S.W.3d 841 (Tex.App.-Houston 2001) RICK D. BATY and BATY & ASSOCIATES INSURANCE AGENCY, INC., Appellants v. PROTECH INSURANCE AGENCY, CONNIE SUZANNE MALLIAROS, TREVA C. NEILL, AETNA LIFE & CASUALTY CO., ITT HARTFORD FIRE INSURANCE CO., AMERICAN MEDICAL SECURITY, INC., and FIDELITY & DEPOSIT COMPANY OF MARYLAND, Appellees Court of Appeals of Texas, Houston (14th Dist.)
• Court: Texas Court of Appeals

Page 841

63 S.W.3d 841 (Tex.App.-Houston [14th Dist.] 2001)

RICK D. BATY and BATY & ASSOCIATES INSURANCE AGENCY, INC. , Appellants v PROTECH INSURANCE AGENCY, CONNIE SUZANNE MALLIAROS, TREVA C. NEILL, AETNA LIFE & CASUALTY CO., ITT HARTFORD FIRE INSURANCE CO., AMERICAN MEDICAL SECURITY, INC., and FIDELITY & DEPOSIT COMPANY OF MARYLAND , Appellees

No. 14-99-00201-CV

Court of Appeals of Texas, Houston (14th Dist.).

November 29, 2001.

Rehearing Overruled Jan. 24, 2002

On Appeal from the 334th District Court Harris County, Texas Trial Court Cause No. 94-62720A

[Copyrighted Material Omitted]

[Copyrighted Material Omitted]

[Copyrighted Material Omitted] Panel consists of Justices Anderson, Frost and Amidei.^*

OPINION ON REHEARING

Kem Thompson Frost, Justice

This case arises out of a dispute between an insurance agency and two of its former officers and shareholders who formed a competing business. After initially settling some of their claims, the insurance agency, appellant Baty & Associates Insurance Agency, Inc. ("BAI") and its remaining shareholder, appellant Rick D.Baty ("Baty"), brought suit against the former officers, appellees Connie Suzanne Malliaros ("Malliaros") and Treva C. Neill ("Neill") and their new company, appellee ProTech Insurance Agency ("ProTech"), claiming the individuals had breached their fiduciary duties and had wrongfully diverted BAI's business to ProTech. BAI and Baty also sued four insurance companies whom BAI claims wrongfully interfered in BAI's existing and prospective business relationships and conspired with its former fiduciaries to steal BAI's customers. The trial court granted summary judgement in favor of ProTech, Malliaros, Neill, and all four insurance companies. In our original opinion, we affirmed, in part, and reversed and remanded, in part.

Now pending before the court are the motions for rehearing filed by the four insurance companies, appellees Aetna Life & Casualty Co. ("Aetna"),¹ ITT Hartford Fire Insurance Co. ("Hartford"), American Medical Security, Inc. ("AMS"), and Fidelity & Deposit Company of Maryland ("Fidelity"). The motions for rehearing filed by Aetna, AMS, and Fidelity are granted. Hartford's motion for rehearing is granted in part, and overruled, in part. We reverse the portion of the trial court's summary judgment dismissing the tort claims of Baty and BAI against Malliaros, Neill, and ProTech, and we remand those claims for further proceedings. We reverse the trial court's summary judgment in favor of Hartford as to the claims of Baty and BAI for tortious interference with prospective business relationships and remand those claims for further proceedings. We affirm the trial court's summary judgment in favor of Aetna, AMS, and Fidelity as to BAI's claims for tortiousinterference with prospective business relationships. We affirm the trial court's summary judgment in favor of Aetna, Hartford, AMS, and Fidelity as to BAI's claims for tortious interference with existing contracts, inducing the breach of a fiduciary duty, and civil conspiracy. We withdraw our opinion of April 5, 2001, and we substitute this opinion in its place.

I. Factual and Procedural Background

BAI is an independent insurance agency authorized to sell property, casualty, life, and health insurance. Baty is the president and part owner of BAI. In 1992, BAI employed Malliaros and Neill as sales representatives. Shortly thereafter, they became officers of the company. In April 1993, Malliaros and Neill each purchased ten percent of BAI stock, becoming shareholders of the company along with Baty. In connection with this purchase of BAI stock, Malliaros, Neill, and Baty entered into an "Agreement Between Shareholders." This agreement contained covenants not to compete.

In 1994, Malliaros and Neill began making plans to start their own insurance agency, ProTech. On August 31, 1994, Malliaros and Neill resigned from BAI. The next day, ProTech commenced business in competition with BAI. ProTech, in furtherance of its business, entered into agency agreements with various insurance companies, including Aetna, Hartford, AMS, and Fidelity.

About a week after Malliaros and Neill resigned, BAI brought suit against them, seeking to enforce the covenants not to compete. BAI asserted claims of breach of contract, breach of fiduciary duty, and unjust enrichment against Malliaros and Neill. BAI also joined ProTech as a defendant in the suit. In November 1994, BAI, Baty, Malliaros, and Neill entered into a "Settlement and Recission Agreement" pursuant to which (1) Malliaros, Neill, and Baty agreed to rescind the "Agreement Between Shareholders," (2) Malliaros and Neill agreed to return their stock to BAI, (3) BAI, in turn, agreed that the covenants not to compete were no longer of any effect; and (4) all parties agreed to dismiss their claims without prejudice. As part of the settlement, Baty and BAI released claims against Malliaros, Neill, and ProTech. The scope of the release is the subject of dispute in this case.

After entering into the settlement agreement, Baty and BAI filed a second suit (this case) against Malliaros, Neill, and ProTech. Baty asserted libel and slander claims; BAI asserted claims for business disparagement, breach of fiduciary duty, unjust enrichment, tortious interference with existing contracts and prospective business relationships, and civil conspiracy. In this second lawsuit, BAI also brought claims against Aetna, Hartford, AMS, and Fidelity, alleging these insurance companies tortiously interfered with its contracts and prospective business relationships and induced Malliaros and Neill to breach the fiduciary duties they, as officers and employees, owed to BAI. Baty and BAI bring this appeal from the summary judgments in favor of the appellees on all of appellants' claims.

II. Summary Judgment Standard of Review

To prevail on a motion for summary judgment, a defendant must establish that no material fact issue exists and that it is entitled to judgment as a matter of law. Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217, 222 (Tex. 1999). If a defendant moves for summary judgment on the basis of an affirmative defense, it has the burden to prove conclusively all the elements of the affirmative defense as a matter of law. KPMG Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999). In conducting our review of the summary judgments, we take as true all evidence favorable to the nonmovants, and we make all reasonable inferences in the nonmovants' favor. Id.

On review of a no-evidence summary judgment, we consider the evidence in the light most favorable to the nonmovants and disregard all evidence and inferences to the contrary. Blan v. Ali, 7 S.W.3d 741, 747 (Tex. App.--Houston [14th Dist.] 1999, no pet.). We sustain a no-evidence summary judgment if: (1) there is a complete absence of proof of a vital fact; (2) the court is barred by rules of law or evidence from giving weight to the only evidence offered to prove a vital fact, (3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence conclusively establishes the opposite of a vital fact. Dagley v. Haag Eng'g Co., 18 S.W.3d 787, 793 (Tex. App.--Houston [14th Dist.] 2000, no pet.). More than a scintilla of evidence exists when the evidence rises to a level that would enable reasonable and fair-minded people to differ in their conclusions. Isbell v. Ryan, 983 S.W.2d 335, 338 (Tex. App.--[14th Dist.] 1998, no pet.). Although the nonmoving party is not required to marshal its proof, it must present evidence that raises a genuine fact issue on the challenged elements. Risner v. McDonald's Corp., 18 S.W.3d 903, 907 (Tex. App.--Beaumont 2000, pet. denied).

III. Analysis

A. Scope of Settlement Agreement's Release and Recission Provisions

Malliaros, Neill, and ProTech moved for summary judgment on all of the claims Baty and BAI asserted against them on the stated ground that Baty and BAI had released those claims in the settlement agreement. Similarly, Aetna, Hartford, AMS, and Fidelity each moved for summary judgment on the claims BAI asserted against them, alleging that because those claims are derivative of BAI's tort claims against Malliaros, Neill, and ProTech, the settlement agreement also released the claims against the insurance companies.

BAI based its breach of fiduciary duty claims on Malliaros and Neill's actions as agents and officers of BAI prior to leaving their employment. BAI claims these actions included unauthorized use of time and effort to set up a competing business, misappropriation of BAI's confidential information for the benefit of their new competing business, solicitation of BAI's employees, failure to disclose their improper activities to BAI's principal officer and shareholder (Baty), and diversion of BAI's clients to ProTech. BAI's factual allegations with respect to Malliaros and Neill's alleged breaches of their fiduciary duties in the first lawsuit are essentially the same as the factual allegations set forth in the current litigation.² Our task is to determine whether the claims asserted in the second suit are barred by the release and/or recission provisions of the "Settlement and Rescission Agreement."

1. Release

A release is a writing which provides that a duty or obligation owed to one party to the release is discharged immediately on the occurrence of a condition. National Union Fire Ins. Co. v. Insurance Co. of N. Am., 955 S.W.2d 120, 127 (Tex. App.--Houston [14th Dist.] 1997), aff'd, 20 S.W.3d 692 (Tex. 2000). Like any other agreement, a release is subject to the rules of construction governing contracts. Grimes v. Andrews, 997 S.W.2d 877, 881 (Tex. App.--Waco 1999, no pet.). When construing a contract, courts must give effect to the true intentions of the parties as expressed in the written instrument. Lenape Resources Corp. v. Tennessee Gas Pipeline Co., 925 S.W.2d 565, 574 (Tex. 1996). The contract...