Emerick v. Mutual Ben. Life Ins. Co.

• Decision Date: 26 July 1988
• Docket Number: No. 69420,69420
• Citation: 756 S.W.2d 513
• Parties: John L. EMERICK, Plaintiff-Respondent, v. MUTUAL BENEFIT LIFE INSURANCE CO., Defendant-Appellant.
• Court: Missouri Supreme Court

Page 513

756 S.W.2d 513

John L. EMERICK, Plaintiff-Respondent, v. MUTUAL BENEFIT LIFE INSURANCE CO., Defendant-Appellant.

No. 69420.

Supreme Court of Missouri En Banc.

July 26, 1988.

Rehearing Denied Sept. 13, 1988.

John W. Cowden, Reggie C. Giffin, Petra T. Tasheff, Kansas City, for defendant-appellant.

Brent L. Brown, John M. Edgar, Craig S. O'Dear, Myron E. Sildon, Kansas City, for plaintiff-respondent.

WELLIVER, Judge.

Respondent, John Emerick, brought this action against appellant, Mutual Benefit Life Insurance Company, for fraud, breach of contract and conversion. Appellant counterclaimed for specific performance of an alleged settlement agreement. The trial jury found for respondent on the fraud, breach of contract and conversion claims and the trial court entered judgment totalling $2,254,117 actual and $6,000,000 in punitive damages. The trial court also entered judgment against appellant on its counterclaim. Appellant appeals both judgments. Respondent appeals the granting of summary judgment for appellant on three other counts of violation of franchise statutes, breach of oral contract and breach of fiduciary duty.

The Court of Appeals, Western District, affirmed the trial court on the fraud count and reversed the conversion count. The summary judgment in favor of appellant on the original counts of violation of franchise statutes, breach of oral contract, and breach of fiduciary duty was affirmed. We transferred this case and decide it as on original appeal. Mo. Const. art. V, § 10. We affirm the summary judgment for appellant on respondent's cross appeals for violation of franchise statutes, breach of oral contract and breach of fiduciary duty. We affirm the trial court's judgment for respondent on appellant's counterclaim for specific performance of the settlement agreement. We reverse the judgments for fraud, conversion and breach of contract.

We remand with directions to assess certain damages and costs consistent with this opinion.

I THE FACTS

Appellant is a mutual life insurance company with its principal office in Newark, New Jersey. Appellant contracts with general agents to distribute its products. General agents, in turn, contract with selling agents who sell the products.

Respondent was a general agent for appellant from 1974 to 1977 in Phoenix, Arizona. In 1977 respondent was offered a position as regional supervisor of agencies and moved into appellant's Western Home Office in Kansas City.

Two years later in July 1979, Mr. Mascotte met with respondent and offered him the general agency in Kansas City. Respondent voiced some concern about the financial aspect of the agency but Mr. Mascotte assured him that the company would work with him.

Respondent signed the General Agency Agreement on August 1, 1979, and took over the Kansas City agency. He reported directly to Mr. Mascotte, because his old position, Vice-President of Agencies, had not yet been filled. In February 1980, Angelo Schiralli was appointed to the Western Home Office as Vice-President of Agencies. Respondent thereafter was to report to Mr. Schiralli rather than Mr. Mascotte.

Mr. Schiralli was concerned about the high expense level of the Kansas City Agency. He expected respondent to submit expenditures to him in advance as called for in the budget agreement. The budget agreement signed by respondent required respondent to consult in advance with Mr. Schiralli before committing himself to any expenditures in excess of $200. Respondent did not get prior approval in accordance with the agreement.

Mr. Schiralli refused to reimburse respondent for these items that had not been approved in advance. Respondent claimed Mr. Mascotte told him before he agreed to take the agency that he did not have to comply with this condition. Mr. Schiralli insisted on compliance and told respondent: "John, I don't want to bust your ass, but please cooperate on these disallows."

Respondent asked Mr. Schiralli to contact Mr. Mascotte. After talking with him, Mr. Schiralli did allow some previously rejected items and reimbursed respondent for these and for contest prizes he had given to his selling agents. He also reimbursed him for items that he had purchased in 1979. However, from that point on, Mr. Schiralli insisted on compliance with the agreement.

Another problem developed when respondent was asked to move his agency from the Western Home Office. The Kansas City agency occupied office space in the Western Home Office building. The Home Office was expanding and needed the space occupied by the agency. Respondent searched for suitable office space. He looked in several different locations and considered not only the price of various offices but also the location. Several of his selling agents had asked to remain in the same area as the Home Office. Eventually respondent was able to negotiate a lease in a new building across the street from the Home Office. His selling agents were particularly pleased with his choice.

When respondent first discussed the lease in February with Mr. Mascotte and Mr. Schiralli, they both agreed it was a very good deal. However, Mr. Schiralli changed his mind after discussing other locations in Kansas City with a friend. He investigated some of these sites and came to the conclusion that the lease signed by respondent was too expensive.

Mr. Schiralli met with Mr. Mascotte and they both agreed respondent's expense level was too high. Mr. Mascotte told Mr. Scharilli to get some firm figures on a prospective lease and discuss it with respondent. Mr. Schiralli compared these figures with those on respondent's lease and found that there was about a $50,000 difference over a two-year period. He looked only at the first two years because the company would only be subsidizing the rent paid by respondent for the first two years respondent had the new agency.

In May 1980, Mr. Schiralli and Mr. Mascotte met with respondent to discuss the lease. They both concluded that it would be unfair to absorb the $50,000 additional expense of respondent's lease. They decided that if respondent were to choose to stay with his lease, he would have to bear the $50,000 that was considered excess cost. According to Mr. Mascotte, he was setting the maximum amount of subsidy that the company would pay on rent. The choice was respondent's: he could either go through with his lease and pay the excess $50,000 personally or go with a less expensive lease and appellant would try to get him out of his lease.

Respondent explained why he did not believe the location proposed by Mr. Schiralli was a good one for the agency. First, respondent had already signed the lease in April and he did not know if he could get out of it. Second, his agents did not want to move downtown, which was the location of the office chosen by Schiralli. Third, respondent had tried to negotiate for an office in that building, and there had been no suitable space available. Respondent asked Mr. Mascotte to reconsider, and Mr. Mascotte said that he would. When respondent heard nothing from Mr. Mascotte the rest of the summer, he considered the issue closed.

In the fall respondent negotiated with Tom Bash, the former general agent, for the going concern value of the agency at the time respondent took over. Mr. Bash originally asked for $115,000 but then agreed to accept a lump sum payment of $25,000. Respondent asked Mr. Schiralli for this amount in the form of a special development allowance loan. (SDA) (This loan was made to a general agent as an advance against future earnings.) Mr. Schiralli told respondent he was reluctant to do so since he was already down for $50,000 of SDA for the lease. Respondent was surprised that Mr. Schiralli and Mr. Mascotte intended to collect the $50,000. Mr. Schiralli worked out a plan whereby respondent could make up the $50,000 over the next three years. The plan involved giving respondent less subsidy so that repayment of the loan would not take money out of his future earnings. Respondent refused to discuss it, believing that Mr. Schiralli was wrong in "penalizing" him.

Eventually Mr. Schiralli did issue respondent the $25,000 SDA but respondent did not give this money to Mr. Bash. Instead in April 1981 he wrote to Mr. Bash, explaining the problem he was having with appellant and the lease. He felt he could not release the $25,000 until the lease issue was resolved.

Respondent then contacted an attorney, Myron Sildon. On April 14, 1981, Mr. Sildon wrote Mr. Schiralli explaining why he believed Mr. Schiralli was mistaken in insisting respondent pay the $50,000. Mr. Schiralli, upon receipt of this letter, contacted Mr. Johnson, Senior Vice-President-Agencies, who agreed with Mr. Schiralli that respondent should be asked to resign or be terminated if he refused. Mr. Schiralli met with respondent and Mr. Sildon and informed respondent of the company's decision.

Respondent was given several reasons for this action, including high expenses, low production, and an inability to work with the home office. Respondent at first refused to resign and then asked for two weeks to consider it. During this time extensive negotiations took place between appellant and respondent. Appellant agreed to pay off respondent's debt in exchange for his resignation. Finally respondent resigned on May 29, 1981, but he did so under protest. Appellant's counsel drafted the alleged agreement made between respondent and appellant. However, there were several clauses contained in this written document which respondent claimed had not been part of the negotiations. Respondent refused to sign the agreement and appellant refused to pay any of the debt until respondent signed.

After respondent resigned but before the settlement agreement could be finalized, appellant took over the agency. Appellant assumed the lease and used the furniture and office equipment. No demand was ever made that either the lease or the furniture be retransferred. Respondent...