Matter of Thomas, Bankruptcy No. 82-1516

• Decision Date: 04 March 1985
• Docket Number: Adv. No. 82-874.,Bankruptcy No. 82-1516
• Citation: 51 BR 653
• Parties: In the Matter of Walter W. THOMAS, Debtor. Walter W. THOMAS, Plaintiff, v. FEDERAL INSURANCE AGENCY, Defendant.
• Court: U.S. Bankruptcy Court — Middle District of Florida

51 B.R. 653 (1985)

In the Matter of Walter W. THOMAS, Debtor.

Walter W. THOMAS, Plaintiff, v. FEDERAL INSURANCE AGENCY, Defendant.

Bankruptcy No. 82-1516, Adv. No. 82-874.

United States Bankruptcy Court, M.D. Florida, Tampa Division.

March 4, 1985.

Albert I. Gordon, Tampa, Fla., for plaintiff.

Lisa Pratt, Henderson, Franklin, Starns & Holt, Ft. Myers, Fla., for defendant.

FINDINGS OF FACT, CONCLUSIONS OF LAW AND MEMORANDUM OPINION

ALEXANDER L. PASKAY, Chief Judge.

THIS IS a Chapter 11 case commenced upon the Voluntary Petition of Walter W. Thomas. The particular matter under consideration involves an adversary proceeding brought by the Debtor. The Debtor seeks by his complaint a declaratory judgment to determine the amount owed, if any, by the Debtor to Federal Insurance Agency, Inc. (Federal) and also to determine the enforceability of a non-competition clause found in an agreement between the Debtor and Federal.

Federal, after responding to the Debtor's complaint, asserted a counterclaim against the Debtor which sought money damages and an injunction. As grounds for its counterclaim, Federal contends that the Debtor breached the above-referenced agreement between the parties, that the Debtor received excess advances against commissions earned under the agreement and that the Debtor is engaging in activity contrary to the non-competition agreement referenced above.

At the pretrial conference, it was resolved that the issues would be bifurcated and that the initial questions tried would be Federal's right to an injunction and to an accounting.

The facts relevant to a resolution of this controversy as they appear from the record may be summarized as follows:

In the summer of 1980, the Debtor contacted the son of the President of Federal and inquired about the possibility of establishing either an employment or an independent contractor relationship with Federal. As a result, the Debtor and Federal entered into an oral agreement whereby the Debtor agreed to undertake to sell casualty, health, life and hospitalization insurance policies on behalf of Federal. However, the Agreement required the Debtor to devote his primary efforts to the sale of casualty insurance policies. For his efforts, the Debtor was to receive a commission on his sales plus $200 per month for expenses. It appears from the record that Federal agreed to pay the Debtor $2,000 per month as a draw against his earned commissions. The draw arrangement was projected for a one year period and it was understood by the parties that in the first year of the association, the commissions earned by the Debtor would not be sufficient to meet the draw he would receive. It was contemplated by the parties that in subsequent years, as the Debtor's sales rose, a break even point between draw and commissions would be reached at which time the Debtor would receive only his commissions with no draw.

Although it was frequently said by the President of Federal that the arrangement was an employment contract, it is clear that the Debtor was an independent contractor. This is so regardless of the fact that the Debtor, at his own request, was treated as an employee and his draw was subject to both FICA and withholding for a short period of time.

The arrangement was later memorialized in writing, but was back-dated a year and a half to August 1, 1980. The written agreement reflected those terms outlined above and in addition stated that the Debtor would devote his full time and efforts to writing policies for Federal.

In addition, the written contract stated that the arrangement could be terminated by either party by the giving of 60 days notice, or that Federal, without the giving of 60 days notice, could terminate the arrangement if the termination was for cause. Under the Agreement, cause was defined as:

"Continued and substantial neglect of business after written warning of specific defects of "Debtor," misconduct by "Debtor" involving moral turpitude, or conviction of a felony."

In addition to the provision on termination, the contract also set forth a non-competition clause whereby the Debtor agreed not to enter into any competing insurance business and not to write any policies for any persons who were clients of Federal on the date the Agreement was terminated. The terms of the Agreement provided that the Debtor should not compete for a period equal to ...