Financial Marketing Services, Inc. v. Hawkeye Bank & Trust of Des Moines, 96-2002

Decision Date21 January 1999
Docket NumberNo. 96-2002,96-2002
Citation588 N.W.2d 450
PartiesFINANCIAL MARKETING SERVICES, INC. f/k/a Bradley M. Schuchat and Martin M. Schuchat d/b/a Financial Marketing Services, Appellant, v. HAWKEYE BANK & TRUST OF DES MOINES, Hawkeye Bancorporation, Mercantile Bancorporation, Inc. and Merger Sub, Appellees.
CourtIowa Supreme Court

Thomas D. Hanson and Robert B. Hanson of Hanson, Bjork & Russell, L.L.P., Des Moines, for appellant.

Roger T. Stetson, Margaret C. Callahan, and Michael R. Reck of Belin Lamson McCormick Zumbach Flynn, P.C., Des Moines, and Gerald H. Grask, Des Moines, for appellees.

Considered by McGIVERIN, C.J., and HARRIS, LARSON, NEUMAN, and TERNUS, JJ.

TERNUS, Justice.

This appeal involves a complex controversy surrounding the termination of a long-term business relationship between two primary entities, plaintiff Financial Marketing Services, Inc. (FMS) and defendant Hawkeye Bank & Trust of Des Moines (Hawkeye). Written contracts between the parties generally provided for the sale of life insurance and annuity products by FMS to bank customers who had been referred to FMS by Hawkeye and its affiliates.

The principal issues raised by FMS in the appeal include (1) whether, by virtue of a 1983 contract between the parties, FMS owned the book of insurance business written on the bank's customers, (2) whether a 1990 agreement between the parties included a covenant not to compete that survived termination of the contract, (3) whether the court should imply a restrictive covenant in the 1990 contract, (4) whether Hawkeye improperly interfered with FMS's contracts with insurance companies, (5) whether Hawkeye improperly interfered with FMS's prospective business relationships with insurance customers, and (6) whether Hawkeye was unjustly enriched by the insurance business it solicited upon termination of the parties' relationship. We think the district court properly resolved these issues in Hawkeye's favor as a matter of law. As a consequence, the court did not err in granting summary judgment to the bank on FMS's claims for declaratory and injunctive relief and for tortious interference, and in directing a verdict on FMS's unjust enrichment claim.

Early in the course of this litigation, the trial court granted a temporary injunction preventing Hawkeye from selling life insurance or annuity products to current customers of the parties. FMS was required to post a bond. Upon resolution of the claims made by FMS, the trial court granted, over the bank's objection, FMS's motion exonerating it and its surety from any liability on the bond. Hawkeye filed a cross-appeal challenging this ruling. We conclude the court erred in releasing FMS and its surety from liability on the bond without first affording Hawkeye an opportunity to be heard on its claim for damages arising from the temporary injunction. Therefore, we reverse and remand on the cross-appeal.

I. Background Facts and Proceedings.

In 1983, Hawkeye, Firstate Lifeco, Inc. (an affiliate of the bank), and FMS 1 entered into an agreement for the sale of life insurance products to customers of Hawkeye-affiliated banks. 2 Under this agreement, Hawkeye Firstate, and Hawkeye-affiliated banks were required to provide leads or referrals to FMS regarding potential purchasers of life insurance products. FMS in turn was obligated to maintain general agency status with acceptable life insurance carriers on behalf of Firstate and to actively solicit the leads provided to it. Firstate agreed to provide office space and staff for the operations of FMS. The agreement also included specific provisions for allocating the commissions received from the sale of life insurance products. The agreement was for a five-year term, renewable in additional five-year increments. It could be terminated by any party upon a one-year written notice.

In the late 1980's, Hawkeye sought to renegotiate the terms of the agreement in lieu of exercising its termination rights. On March 1, 1990, a new agreement was executed between FMS and Hawkeye. (Firstate was not a party to the 1990 contract.) Under this contract, FMS itself became the general agent and the participating banks, rather than Firstate, agreed to have an officer or employee on staff who could be licensed through FMS to sell life insurance and annuities. The Hawkeye banks continued to have the obligation to make referrals to FMS, and FMS had the corresponding obligation to follow up on these leads. As FMS notes in its brief, "little changed operationally with the execution of the 1990 agreement except the compensation of the parties." The 1990 contract was for a one-year term, automatically renewable for one-year periods; it could be terminated by either party upon six-months written notice.

By 1993, Hawkeye and its parent, Hawkeye Bancorporation, began to consider internalizing their life insurance and annuity programs. To this end, Hawkeye Bancorporation formed a broker-dealer, Hawkeye Investor Center, Inc. (HICI), to sell securities, investments, life insurance and annuities. All bank personnel who were licensed to sell insurance were transferred to the payroll of HICI.

FMS viewed these actions as precursors to an attempt to take over FMS's book of business in the event the 1990 contract was terminated. As a result, FMS filed suit, claiming it had the exclusive and permanent right to transact life insurance and annuity business with existing bank customers who were also insurance clients of FMS. It sought a declaratory judgment to this effect and injunctive relief to prevent Hawkeye from directly or indirectly interfering with FMS's customer relationships. FMS also made claims for breach of contract and for tortious interference with FMS's existing contractual relationships with insurance companies.

Shortly after this lawsuit was filed, Hawkeye gave FMS written notice that it was terminating the 1990 agreement, effective October 21, 1995. Contemporaneously with this notice, Hawkeye notified its customers that its relationship with FMS was to be terminated as of October 21, 1995. Although Hawkeye told its customers that it would be able to service their life insurance and annuity needs after October 1995, it expressly stated that "[f]or the next six months we will continue working with Financial Marketing Services to bring you tax-deferred annuities and life insurance products."

As a result of this letter and other actions by Hawkeye, FMS sought a temporary injunction to enjoin Hawkeye from interfering and competing with FMS with respect to FMS clients who were also bank customers. As noted above, the district court granted temporary injunctive relief pending a decision on the merits of FMS's claims. FMS was required to post a $250,000 bond. FMS also amended its petition to include a claim for unjust enrichment and a claim for tortious interference with prospective business relationships.

Thereafter, the district court granted Hawkeye's motion for summary judgment on FMS's request for declaratory and injunctive relief and its tortious interference claims. (Despite the court's summary judgment ruling, the temporary injunction remained in effect.) The contract and unjust enrichment claims proceeded to trial. After the close of evidence, the trial court granted Hawkeye's motion for directed verdict on the unjust enrichment claim. The jury subsequently returned a verdict in the bank's favor on the contract claim.

After final judgment, Hawkeye brought a separate action on the injunction bond. FMS, however, filed a motion in the present case to release it from its obligation to post security and to exonerate it and its surety from any liability on the bond. Over Hawkeye's objections, the trial court granted FMS's motion.

This appeal and cross-appeal challenge the district court's rulings on Hawkeye's motion for summary judgment, Hawkeye's motion for directed verdict, and FMS's motion on the bond. FMS did not appeal from the jury's adverse decision on its contract claim.

II. Scope of Review--Summary Judgment Ruling.

We review a district court's ruling on a motion for summary judgment for correction of errors of law. See American Family Mut. Ins. Co. v. Allied Mut. Ins. Co., 562 N.W.2d 159, 163 (Iowa 1997). Summary judgment will be upheld when the moving party shows there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law. See Iowa R. Civ. P. 237(c). Thus, we first determine whether there is any genuine issue of material fact. See Hoefer v. Wisconsin Educ. Ass'n. Ins. Trust, 470 N.W.2d 336, 338 (Iowa 1991). If not, the court must decide whether the moving party is entitled to judgment as a matter of law. See id.

An issue is "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See Fees v. Mutual Fire & Auto. Ins. Co., 490 N.W.2d 55, 57 (Iowa 1992). When the dispute is over facts that might affect the outcome of the suit under the applicable law, the issue is likewise "material." See Farm & City Ins. Co. v. Anderson, 509 N.W.2d 487, 491 (Iowa 1993). We consider the entire record before us, including the pleadings, depositions, answers to interrogatories, and admissions on file. See Iowa R. Civ. P. 237(c).

III. Claim for Declaratory and Injunctive Relief.

FMS claimed in its petition that its contractual relationship with Hawkeye entitled it to a "declaration that in the event of termination of the relationship ... [FMS] has the exclusive and permanent right as between [FMS] and [Hawkeye] to transact life insurance and annuity business with [FMS's] existing insurance clients who are also [Hawkeye] bank customers." It also sought a permanent injunction to prevent Hawkeye from soliciting FMS's clients. In support of this claim, FMS relies primarily on two contractual provisions, one in the 1983 contract and one in the 1990 contract. 3 As a fall back position, FMS argues that even if the 1990 contract did not...

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