Faircloth v. A.L. Williams & Associates, Inc.

• Decision Date: 01 December 1992
• Docket Number: A92A1167,Nos. A92A1166,s. A92A1166
• Citation: 426 S.E.2d 601,206 Ga.App. 764
• Parties: , 1993-1 Trade Cases P 70,162 FAIRCLOTH v. A.L. WILLIAMS & ASSOCIATES, INC. et al.; A.L. WILLIAMS & ASSOCIATES, INC. v. FAIRCLOTH.
• Court: Georgia Court of Appeals

Page 601

426 S.E.2d 601

206 Ga.App. 764, 1993-1 Trade Cases P 70,162

FAIRCLOTH v. A.L. WILLIAMS & ASSOCIATES, INC. et al.;

A.L. WILLIAMS & ASSOCIATES, INC. v. FAIRCLOTH.

Nos. A92A1166, A92A1167.

Court of Appeals of Georgia.

Dec. 1, 1992.

Reconsideration Denied Dec. 16, 1992.

Certiorari Denied April 8, 1993.

Gambrell, Clarke, Anderson & Stolz, Irwin W. Stolz, Jr., Seaton D. Purdom, Atlanta, for appellant.

Chilivis & Grindler, Nickolas P. Chilivis, Gary G. Grindler, John K. Larkins, Jr., Thomas D. Bever, Atlanta, Stanton J. Shapiro, Duluth, for appellee.

BIRDSONG, Presiding Judge.

This is the second summary judgment appeal in this case. See A.L. Williams & Assoc. v. Faircloth, 190 Ga.App. 872, 380 S.E.2d 471, reversed in part and affirmed in part, A.L. Williams & Assoc. v. Faircloth, 259 Ga. 767, 386 S.E.2d 151.

Norman Tee Faircloth was a Senior Vice-President (SVP) and Regional Vice-President (RVP) of A.L. Williams & Associates, Inc., (Williams) an insurance agency, for sale of insurance for Massachusetts Indemnity & Life Insurance Company (MILICO). There were three agreements among the parties: the agency agreement between Faircloth and MILICO and the RVP and SVP agreements between Faircloth and Williams; Faircloth was earning override commissions on the sales of 40,000-60,000 sub-agents; his employment was terminated in 1982; he allegedly solicited agents of Williams for a new business; Williams terminated his commissions for breach of non-compete covenants; Faircloth filed this suit. The complaint alleges breach of contract, fraudulent termination of contracts, tortious interference with contracts and conversion of commissions. The trial court granted Faircloth's motion for partial summary judgment, holding that the non-compete provisions were invalid for being overbroad, but that they were valid insofar as they served as a condition to entitlement to contract benefits including commissions.

In that first appeal we held that as to " 'fraudulent termination' of ... contracts[,]" the trial court correctly denied summary judgment to Williams, because under the SVP agreement Williams could terminate Faircloth only for cause or by agreement, and Williams was fiduciary agent for Faircloth and a jury might find Williams abused its agency by damaging Faircloth to its benefit. See 190 Ga.App. at 874(1), 380 S.E.2d 471. But, the Supreme Court reversed our ruling on a supervening rationale that Williams could not be liable for breach of contract of the agency and RVP contracts for a termination without cause because Williams was entitled thereunder to terminate Faircloth for any reason or no reason; that moreover the breach of contract does not give rise to a tort, so there is no cause of action for fraudulent termination; therefore, the only issue as to termination is breach of contract of the SVP contract for termination without cause. See 259 Ga. at 769(3), 770, fn. 5, 386 S.E.2d 151.

As to the claim that Williams tortiously interfered with relations of MILICO and Faircloth, we held that on account of the fiduciary agency relations between Williams and Faircloth a jury could find Williams acted outside its powers in notifying MILICO to terminate Faircloth. But, the Supreme Court held in a supervening rationale that Faircloth's agency agreement with MILICO provides that Williams " 'has the express right to notify the Company to terminate this Agreement[,]' " and Williams could not be liable for what it has the right to do. 259 Ga. at 769, 386 S.E.2d 151.

On the claim that Williams converted Faircloth's commissions, the trial court ruled that under Kem Mfg. Corp. v. Sant, 182 Ga.App. 135, 355 S.E.2d 437, " 'defendants could not deny plaintiff his benefits based upon any breach of covenant which this court has found to be overbroad and unenforceable....' " 190 Ga.App. at 876, 380 S.E.2d 471. We affirmed the ruling. The Supreme Court affirmed, saying: " 'While forfeitures are not unlawful, the law does not favor them, and all ambiguities in a contract are to be resolved against their existence.' [Cit.] It would be paradoxical to strike down a covenant as invalid, and at the same time uphold a forfeiture that is conditioned upon a violation of that very covenant. Hence, a forfeiture provision that is conditioned expressly upon an invalid covenant must be invalid in se. Any earlier propositions of law to the contrary are disapproved." 259 Ga. at 767-768, 386 S.E.2d 151. "The trial court [held] ... that Faircloth's entitlement to renewal commissions was not forfeited by his violation of the invalid covenants [id. at 767(1)(a), 386 S.E.2d 151] .... The trial court did not err." Id. at 768(b), 386 S.E.2d 151.

On remand from the Supreme Court we vacated Divisions 1 and 2 of our decision in 190 Ga.App. 872, 380 S.E.2d 471, supra, to the extent that they were inconsistent with the Supreme Court's decision, and we remanded to the trial court. A.L. Williams & Assoc. v. Faircloth, 194 Ga.App. 324, 391 S.E.2d 143.

The result of those appeals was to remove the counts for fraudulent termination of contracts, breach of the agency and RVP contracts for improper termination and tortious interference. The issues then left pending in the trial court were: breach of the SVP contract by termination without cause; breach of contracts for failure to pay commissions; conversion of commissions.

Williams made another motion for summary judgment on the grounds that since the restrictive covenants in the contracts are invalid and we had held that provisions conditioned thereon also fail, then not only the forfeiture of benefit provisions must fail but the payment provisions must also fail. Williams further asserted that by merely seeking to recover an alleged contract indebtedness, not chattels, Faircloth fails to state a cause of action for conversion, per Hodgskin v. Markatron, 185 Ga.App. 750, 365 S.E.2d 494.

Faircloth made a cross-motion for summary judgment asserting that Williams did not in fact render an effective termination, because Williams did not file a notice of termination for cause with the Georgia Insurance Commission. Faircloth also filed an affidavit averring that Mr. A.L. Williams stated that he had personally received the wealth Faircloth would have received if he had stayed, which Mr. Williams estimated at $25-50 million.

The trial court denied summary judgment to Williams on its contention that the payment provisions of the contracts fail along with the restrictive covenants, and granted summary judgment on the contention that Faircloth could not maintain a claim for conversion of money owed under a contract. The trial court also denied Faircloth's motion for summary judgment as to the contention that Williams did not terminate Faircloth because it did not file a notice with the insurance commissioner. Held:

Case No. A92A1166

1. We are constrained to hold that the trial court correctly granted partial summary judgment to Williams as to conversion, ruling that an action for conversion would lie only for withholding of "certain bills or coins" and does not lie on account of a mere failure to pay money under the contracts, under the decisions of Cooke v. Bryant, 103 Ga. 727, 30 S.E. 435 and Hodgskin v. Markatron, supra 185 Ga.App. at 751(1), 365 S.E.2d 494. Compare, however, DCA Architects v. American Bldg. Consultants, 203 Ga.App. 598, 600(2), 417 S.E.2d 386. It was held that a breach of contract does not by itself give rise to a discrete action for tort; the allegations that a tort was committed add nothing of substance to the breach of contract claim and are mere surplusage (A.L. Williams & Assoc. v. Faircloth, 259 Ga. at 769-770, 386 S.E.2d 151, supra); however, we frequently allow separate claims that might be loosely called "surplusage," as long as they constitute recognized claims. A failure to pay money under contract might, like conversion, be an " ' "unauthorized assumption and exercise of the right of ownership over personal property belonging to another, in hostility to his rights; an act of dominion ... or an unauthorized appropriation" ' " (DCA Architects, supra), so as to "add something" considerable in the nature of a tort, somewhere between or beyond breach of contract and bad faith breach of contract. But according to Cooke, supra (and see 28 EGL, Trover & Conversion, § 11 (1992 rev.)) an action for conversion will lie only for appropriation of discrete physical things. But see Prosser & Keeton on Torts, § 15, Conversion, pp. 90-92 (5th ed.) which implies this may be too great adherence to the original common law which related actions of trover for conversion only to tangible things that may be "lost" and "found," and that there may be no very valid reason for this distinction, considering today's increasing use of intangible ideas of assets, including an ordinary debt, as personal property.

Messrs. Prosser and Keeton, calling conversion "a fascinating tort [which] has largely eluded the attention of legal writers" (id. at 88), conclude that rather than calling the taking or keeping of "intangible assets" conversion, it would seem preferable to fashion other remedies to protect people from having "intangible values" being used and appropriated in unfair ways. Id. at 92. Our courts have not found it necessary to limit parties to one remedy, as a principle.

Recently, an action for conversion of certificates of deposit by an executor was "condoned" by the Georgia Supreme Court, in Hudson v. Abercrombie, 258 Ga. 729, 374 S.E.2d 83; a certificate of deposit is a physical piece of paper, but what those plaintiffs sought to recover for was conversion of the money which the pieces of paper represented. As to conversion generally as a distinct act of dominion wrongly asserted over one's property, see Maryland Cas. Ins. Co. v. Welchel, 257 Ga. 259, 356 S.E.2d 877 and cits. It would seem the gist of the tort is an act of hostile dominion or appropriation, and is not merely a matter of...