Coverdell v. Mid-South Farm Equipment Association

• Decision Date: 26 June 1964
• Docket Number: No. 15279.,15279.
• Citation: 335 F.2d 9
• Parties: E. P. COVERDELL, Plaintiff-Appellee, v. MID-SOUTH FARM EQUIPMENT ASSOCIATION, Inc., and Mid-South Farm Equipment Association Insurance Trust, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

335 F.2d 9 (1964)

E. P. COVERDELL, Plaintiff-Appellee, v. MID-SOUTH FARM EQUIPMENT ASSOCIATION, Inc., and Mid-South Farm Equipment Association Insurance Trust, Defendants-Appellants.

No. 15279.

United States Court of Appeals Sixth Circuit.

June 26, 1964.

Thomas F. Turley, Jr., Memphis, Tenn., Cooper Turner, Jr., Memphis, Tenn., on brief; Canada, Russell & Turner, Memphis, Tenn., of counsel, for appellants.

Leo Bearman, Jr., Memphis, Tenn., Leo Bearman, Sr., Memphis, Tenn., on brief, for appellee.

Before PHILLIPS, Circuit Judge, MAGRUDER, Senior Circuit Judge, and WEINMAN, District Judge.

WEINMAN, District Judge.

This is an appeal from a jury verdict and the judgment rendered thereon wherein the jury, for breach of contract, awarded $18,750.00 to E. P. Coverdell, plaintiff,¹ against defendants Mid-South Farm Equipment Association, Inc. (hereinafter referred to as the Association) and Mid-South Farm Equipment Association Insurance Trust (hereinafter referred to as the Trust).

Plaintiff is in the insurance business specializing in creating and establishing group life insurance plans. Defendant Association is a Tennessee Corporation whose members are basically farm equipment dealers in Arkansas, Mississippi, Tennessee and the Panhandle of Missouri; there are approximately 530 members, each being a firm and each firm having one or more employees. Defendant Trust was created by the Association to establish a plan of group life and accident and health insurance for those members of the Association who desired to subscribe to the plan.

Plaintiff and Thad Caraway, a trustee of the Trust and executive director and secretary of the Association, met personally for the first time at a convention in August of 1960. Caraway previously had made inquiry and was advised by the California Equipment Dealers Association that Union Central Life Insurance Company (hereinafter referred to as Union Central) and Coverdell had written a similar group policy for it. At this first meeting, some preliminary discussion was had regarding a group insurance plan for the Association; however, Coverdell did not have the necessary materials with him and it was decided that the two should meet in Memphis on September 20. At that second meeting, it was decided that Coverdell should conduct a survey by mail in the name of the Association to determine from the members how many would be interested in insurance of this nature. Following the survey, both Coverdell and Caraway agreed that each should submit a résumé of the plan to the Board of Trustees.

On November 4, 1960, a meeting of the Board of Trustees was held at the office of the Association in Memphis. Present were Coverdell; four of the trustees; Mr. McCroskey, a vice-president of Union Central; and Mr. Earl Brooks, Manager of Union Central's Memphis office. It should be noted that Coverdell, in the year 1960, was licensed by the State of Tennessee as an insurance agent for Union Central. He was so licensed because under Tennessee law he was required to be licensed by one particular company though he could place a group policy in a company other than Union Central.

That meeting lasted two and a half hours and eighty-five questions which had been prepared by the trustees were discussed, as were the qualifications of plaintiff. When plaintiff left the meeting, he understood that a competitor was to be interviewed that afternoon.

There is little or no dispute as to the foregoing facts. The dispute arises as to subsequent events. On the same evening, November 4, Coverdell was invited by Caraway to the Petroleum Club where three of the four trustees who had attended the meeting, and their wives, were present. Coverdell testified, in effect, that he was informed by the trustees that he was hired under a personal service contract to organize the group insurance plan, to set it up in workable order, to place it with a company and to solicit the membership. He further testified that the next day he flew to Atlanta and worked the entire weekend to prepare the plans and materials for the solicitation campaign. He then sent the materials to Caraway. He also testified that he cancelled an appointment in Texas so as to make himself completely available in Memphis.

On November 19, Coverdell was informed that the trustees had held another meeting with his competitor and it had been awarded the contract.

One further point should be noted and that is that much of the material prepared by Coverdell to be used in soliciting the group insurance was subsequently used verbatim in soliciting the group insurance through Coverdell's competitor.

Coverdell sued the Association and the Trust for breach of contract and damages which represented the loss of commissions he would have received from the sale of the insurance.

On appeal, the defendants argue 1) that no personal employment contract between plaintiff and defendants existed or could have existed; 2) that the trustees did not have the power to make the alleged contract; 3) that the Trust cannot be sued as an entity; 4) that the trustees were not and could not be the agents for the Association and 5) that the jury's verdict was excessive.

As to the argument that no personal employment contract between plaintiff and defendants existed or could have existed. The defendants, in their brief, state:

"* * * we come first to the question whether a soliciting agent of a life insurance company has any cause of action against a prospective insured upon which he can collect damages as for breach of contract when the prospect, after first indicating a willingness to purchase insurance, changes his mind and refuses to complete the purchase."²

This statement of the question ignores the fact that plaintiff tried his case, and the Trial Judge charged the jury, on the theory that plaintiff was hired under a personal service contract to set up a group insurance plan and then place it with an insurance company.

Further, in support of their argument, defendants cite a Tennessee statute which provides:

"Any person who shall solicit an application for insurance shall in all matters relating to such application and the policy issued in consequence thereof be regarded as an agent of the company issuing the policy, and not the agent of the insured. * * *."³

However, this statute does not prevent or make illegal a personal service contract to set up a group insurance plan. There was sufficient evidence in the record from which the jury could find, as it did, that a personal service contract existed.

As to the argument that the trustees did not have the power to make the alleged contract. The power of the trustees to make the alleged contract is clear. A review of the Trust Agreement shows how extensive the trustees' powers were. They had the power to apply for and accept as part of the Fund group policies issued to them in their names as trustees and providing life and accident and health insurance;⁴ to construe the provisions of their own Trust;⁵ to promulgate such rules and regulations as may, in their discretion, be proper or necessary for the sound and efficient administration of the Trust;⁶ to act by majority vote;⁷ to borrow money and to secure the loan by pledge or mortgage of trust property.⁸

And quite conclusive of the wide scope of their power is the following:

"Section 16. The Trustees are expressly authorized and empowered, at any time and from time to time, to execute and deliver any and all instruments in writing necessary or appropriate for the administration or handling of the Trust.

"Section 17. The Trustees are further authorized and empowered to do, at any time and from time to time, any and every act and thing, and to enter into and to carry out any and every agreement with respect to the trust estate or any part thereof which they would have the right to do if they were individual owners thereof as they may deem in the best interests of the Trust, and the subscribers thereto, without being limited in any way by the grant of specific powers, EXCEPT as to the limitations contained in Article VIII. Sections 2, 3, and 4."⁹ Article VIII deals with amending the Trust Agreement and Declaration of Trust.

As to the argument that the Trust cannot be sued as an entity. The plaintiff brought action against the Trust as an unincorporated association or organization by serving the Secretary of State pursuant to Section 20-223, Tennessee Code Annotated, which, at the time the suit was filed, provided:

"Any unincorporated association or organization, whether resident or nonresident,¹⁰ doing or desiring to do business in this state by performing any of the acts for which it was formed, shall, before any such acts are performed, appoint an agent in this state upon whom all process may be served, and certify to the clerk of the circuit court of each county in which said association or organization desires to perform any of the acts for which it was organized the name and address of such process agent. If said unincorporated association or organization shall fail to appoint the process agent pursuant to this section, all process may be served upon the secretary of the state of Tennessee. Upon such service, the secretary of state by registered return-receipt mail shall forward a copy of the process to the last known address of such unincorporated association or organization. Service upon the process agent appointed pursuant to this section or upon the secretary of state, if no process agent is appointed, shall be legal and binding on said association or organization, and any judgment recovered in any action commenced by service of process, as provided in this section, shall be valid and may be collected out of any real or personal property belonging to the association or organization."

The crucial question, of course, is whether the Trust is an "unincorporated association or organization." Rule 17 (b) of the Federal Rules of Civil Procedure provides, in part:

...