Clement v. Farmers Ins. Exchange

• Decision Date: 22 November 1988
• Docket Number: No. 17004,17004
• Citation: 766 P.2d 768,115 Idaho 298
• Parties: George Ronald CLEMENT, Plaintiff-Appellant, v. FARMERS INSURANCE EXCHANGE; Truck Insurance Exchange; Fire Insurance Exchange; Mid Century Insurance Co.; Farmers New World Life Insurance Co.; and Farmers Insurance Co. of Idaho, Defendants-Respondents.
• Court: Idaho Supreme Court

Page 768

766 P.2d 768

115 Idaho 298

George Ronald CLEMENT, Plaintiff-Appellant, v. FARMERS INSURANCE EXCHANGE; Truck Insurance Exchange; Fire Insurance Exchange; Mid Century Insurance Co.; Farmers New World Life Insurance Co.; and Farmers Insurance Co. of Idaho, Defendants-Respondents.

No. 17004.

Supreme Court of Idaho.

Nov. 22, 1988.

Grover & Walker, Chartered, Idaho Falls, for plaintiff-appellant. Keith M. Walker argued.

Elam, Burke and Boyd, Boise, for defendants-respondents. Bobbi K. Dominick argued.

SHEPARD, Chief Justice.

This is an appeal from a summary judgment granted to defendants-respondents Farmers Insurance Exchange, et al., in an action brought by plaintiff-appellant Clement, asserting a breach of and a wrongful termination of a written contract designating Clement as an insurance agent for Farmers Insurance. We affirm.

In 1977 Clement and Farmers Insurance entered into a contract wherein Clement agreed to sell insurance as an agent for Farmers. The contract was silent as to duration, but expressly permitted either party to terminate the contract after a 90-day advance notice of the termination.

At a later time Farmers establsihed a sales quota system, and Clement was identified as a low-producing agent. Clement was so informed and was required to upgrade his sales activity to that of a full time agent, or resign. After discussions and negotiations Farmers, in October, 1983, informed Clement that pursuant to the terms of the written contract, the agency with Clement would be terminated in 90 days. Clement thereafter commenced this action, arguing that the contract at issue here was one for employment-at-will, and as such contains an implied covenant of good faith and fair dealing which modifies the express terms of the contract allowing termination by either party upon 90-day notice. Hence, he argues that termination of the contract may be permitted only for good cause, and Farmers is guilty of breach of the contract despite compliance with the express terms of the contract. Clement also asserted that Farmers' termination of the contract was in contravention of public policy, thereby giving rise to an action in tort for wrongful termination. Clement lastly argues that the original written contract was modified when representatives of Farmers caused Clement to believe he could only be terminated with good cause, and that no cause existed for such termination. In light of the alleged modifications, Clement asserts breach of the contract by Farmers.

As noted above, much of Clement's argument is couched in terms of breach of an employment-at-will contract. Obviously such contractual relationships arise only from an employer/employee circumstance. Clement's own characterization in his complaint is that he was, and is, an independent contractor. That assertion of independent contract status is supported in Anderson v. Farm Bureau Mutual Insurance Co. of Idaho, 112 Idaho 461, 732 P.2d 699 (Ct.App.1987).

Nevertheless we are urged in the instant case to hold that an express written provision of a contract between the parties which permits either party to terminate the contractual relationship upon 90-day notice is invalid and inoperative unless the terminating party has good cause. It is argued that an implied covenant of good faith and fair dealing so requires the invalidating of an express termination provision of a written contract. We decline to so hold. Here, there is no assertion that the contract was entered into by either party on anything but a voluntary basis. There is no allegation of misrepresentation or fraud in the negotiations or the execution of the contract. The contract provides no terms as to duration except the provision providing for termination by either party upon 90-days notice. In such a circumstance either party may be unwilling to enter into such an ongoing relationship without the ability to terminate at will. There may be a myriad of reasons on either side which make such a right of termination desirable or necessary. Presumably the right of termination being an express provision of the written contract, it was bargained for, and considered necessary by both parties. The law generally requires that a contractual relationship be defined with reasonable certainty, and to be enforceable a contract must be sufficiently definite in its terms that the performance to be rendered by each party can be ascertained with reasonable certainty. Friedman v. Tappan Development Corp., 22 N.J. 523, 126 A.2d 646 (1956).

In the instant case the contract provides no durational period, but rather expressly provides each party to the contract the authority to terminate the contractual relationship upon 90-day notice. Here, there is no assertion that the formalities of notice were not complied with. We hold that the express written contract term authorizing the termination upon 90-days notice is not overridden by an implied covenant of good faith and fair dealing which would supplant the express language of the contract and permit termination only upon good cause.

As noted above, Clement also argues that the contract is one for employment-at-will, his termination was contrary to public policy, and therefore his action also lies in tort. We disagree. In Anderson, supra, the Court of Appeals also had for consideration the termination of an insurance agent. The Court of Appeals well stated the law pertaining to the public policy exception to employment-at-will contracts, i.e.:

For the sake of discussion we will assume--but we do not decide--that the limited protection afforded by law to employees at will also applies to independent contractors. The rule in Idaho, as in most states, is that unless an employee is hired pursuant to a contract which specifies the duration of the employment or limits the reasons for which the employee may be discharged, the employment is at the will of either party. The employer may terminate the relationship at any time for any reason without incurring liability. (citations omitted.) The only general exception to this rule is that an employer may be liable if the discharge is for a reason contravening public policy. The public policy exception has been held to protect employees who refuse to commit unlawful acts, who perform important public obligations, or who exercise certain legal rights or privileges. (citations omitted.)

Anderson, supra, 112 Idaho at 468-69, 732 P.2d at 706-07.

Here, there is no showing that the instant case falls within the strictures of Anderson, supra. See also Jackson v. Minidoka Irrigation District, 98 Idaho 330, 563 P.2d 54 (1977).

We hold that the district court was correct in concluding that Farmers' exercise of the right to terminate the contractual relationship pursuant to the express terms of the written contract did not constitute a breach of the contractual relationship, nor did the termination by Farmers constitute action violative of public policy. See Jones v. E G & G Idaho, Inc., 111 Idaho 591, 726 P.2d 703 (1986); Spero v. Lockwood, 111 Idaho 74, 721 P.2d 174 (1986); Staggie v. Idaho Falls Consolidated Hospital, 110 Idaho 349, 715 P.2d 1019 (Ct.App.1986); Jackson v. Minidoka Irrigation District, supra.

Clement also asserts that factual issues remain as to whether or not the written contract provisions authorizing termination upon 90-days notice had been modified by oral agreements between the parties. As noted by the district court in its decision upon summary judgment, those assertions by Clement, even assuming their truthfulness, do not raise disputed issues of material fact. The alleged representations made by Farmers during negotiations leading to the written contract are all merged with and superceded by the written contract. The subjective beliefs of Clement that he could only be terminated for cause are directly contrary to the terms of the written contract and such subjective belief forms no basis upon which to find a subsequent oral modification of an earlier written contract. See Minihan v. American Pharmaceutical Assn., 812 F.2d 726 (D.C.Cir.1987); Page v. Carolina Coach Co., 667 F.2d 1156 (4th Cir.1982); Peterson v. Wirum, 625 P.2d 866 (Alaska 1981). See also Galaxy Outdoor Advertising v. Idaho Transportation Department, 109 Idaho 692, 710 P.2d 602 (1985).

We hold that the trial court did not err in granting summary judgment, and such order of the district court is affirmed. Costs to respondent.

BAKES and JOHNSON, JJ., concur.

JOHNSON, Justice, specially concurring.

I concur in the result reached in this case. I write to state the reason for my concurrence.

In my view, the agreement between Clement and Farmers is not an employment agreement. It is a contract establishing an agency relationship. Our Court of Appeals has stated that "an insurance agent whose function is solely to bring about contractual relations between his principals and others on his own initiative, without being subject to the principal's direction as to how he shall accomplish this result, is ordinarily held to be an independent contractor." Anderson v. Farm Bureau Mutual Insurance Company of Idaho, 112 Idaho 461, 465, 732 P.2d 699, 703 (Idaho App.1987). The agreement here specifically states that Clement is an independent contractor and not an employee. This difference is crucial to my decision. If Clement were an employee of Farmers, my vote might very well be different.

In Anderson the court of appeals said:

For the sake of discussion we will assume--but we do not decide--that the limited protection afforded by law to employees at will also applies to independent contractors.

112 Idaho at 468, 732 P.2d at 706.

I am not prepared to make the same assumption. The employee at will rule is limited to "employees" who have not been hired for a definite period of time. Thomas v. Ballou-Latimer Drug Co., 92 Idaho 337, 341, 442 P.2d 747, 751 (1968); Jackson v. Minidoka Irrigation District, 98 Idaho 330, 333, 563 P.2d 54, 57 (1...