Stanger v. Sentinel Sec. Life Ins. Co.

• Decision Date: 11 August 1983
• Docket Number: No. 17757,17757
• Citation: 669 P.2d 1201
• Parties: Kenton L. STANGER; Dale M. Anderson, as the personal representative of the Estate of Merlin D. Anderson; and Balanced Security Corporation of America, Plaintiffs and Respondents, v. SENTINEL SECURITY LIFE INSURANCE COMPANY, Defendant and Appellant.
• Court: Utah Supreme Court

Page 1201

669 P.2d 1201

Kenton L. STANGER; Dale M. Anderson, as the personal representative of the Estate of Merlin D Anderson; and Balanced Security Corporation of America Plaintiffs and Respondents, v. SENTINEL SECURITY LIFE INSURANCE COMPANY, Defendant and Appellant.

No. 17757.

Supreme Court of Utah.

Aug. 11, 1983.

Dwight L. King, Salt Lake City, for defendant and appellant.

John P. Ashton and James A. Boevers, Salt Lake City, for plaintiffs and respondents.

HOWE, Justice:

Plaintiffs sued to recover commissions allegedly due them on sales of insurance which they claimed were being wrongfully withheld by defendant Sentinel. A jury returned special verdicts finding that plaintiffs were entitled to their commissions, that defendant had no contractual right to repayment by plaintiffs of certain amounts it had "advanced" them and that defendant had waived and was estopped from requiring repayment. Defendant moved for judgment NOV or for a new trial. The motion was denied and defendant appeals.

On February 15, 1965 plaintiff Merlin D. Anderson, together with two other partners, entered into a "Sales Management Group Agreement" (SMG Contract) with Sentinel. Sentinel had theretofore been selling mostly small "burial plan" policies, but planned an expansion into the sale of large ordinary life insurance policies. Anderson and plaintiff Kenton L. Stanger had previously been successful managers and agents affiliated with Farm Bureau--Country Mutual Life Insurance Co. Stanger signed a separate "General Agent's Contract" (Stanger Contract) with Sentinel on March 1, 1965. Both contracts covered the agents' authority, their territory, and the payment of commissions. Only the SMG Contract contained a provision on the payment of expenses of the Sales Management Group which read as follows:

The Company may from time to time pay expenses of the Sales Management Group or sub-agents and if such expenses are paid, such practice shall not create a right in Sales Management Group or sub-agent to require such payment and the Company may make agreements from time to time that said advancements may be reimbursable or nonreimbursable and if such arrangements are made they shall not set a precedent.

On March 10, 1965, Stanger received $7,000 from Sentinel and executed a promissory note in that amount, payable in amounts of not less than $100.00 per month. Stanger complained that he did not like the payment provision, but was told by Sentinel that it needed the note to get the payment passed by the Board. Stanger used the entire amount to develop new insurance business for Sentinel. When Sentinel began withholding monthly installments from Stanger's accrued commissions, Stanger immediately complained because he had been told that the note would not be a debit. Sentinel informed him at that time that if his production was substantial and to Sentinel's satisfaction, the note would not have to be repaid. The withholding of installments from commissions ceased in the fall of that year.

In April of 1965 Stanger signed up as Sentinel's special agent Robert Ipsen, who for the next 17 months received $1,000 per month advances from Sentinel for the development of the Arizona territory. Under the Stanger Contract, the general agent was responsible for any indebtedness arising under contract of all sub-agents under his authority. Sentinel initially withheld $1,000 as a debit against earned monthly commissions from Ipsen's account. When Ipsen complained, on similar grounds as Stanger, that these were not to be reimbursable expenses, the practice was discontinued as against him, but the $17,000 later appeared as a debit item on Stanger's account. Stanger testified, and Sentinel admitted, that at the time these sums were advanced to Ipsen, he was a special agent under Stanger's regional supervision, but not his sub-agent.

In 1966, additional cash flow was required by Stanger to pay expenses and continue the operation of his insurance agency. Stanger negotiated monthly payments of $2,000 with Sentinel through the second year of his contract. These again started to show up as debits on the commission statements. Upon complaint, Stanger was told that this method was necessary to reflect an accounting on the books and that Sentinel considered these sums developmental allowances which had nothing to do with regular advances against commissions. The practice of withholding these amounts was stopped immediately. No further amounts were withheld from Stanger's commissions between late 1965 and 1975.

On January 13, 1969 the SMG Contract was superseded by a Modification Agreement resulting from the transfer of Anderson's two partners to employee status with Sentinel. In that agreement the actual debit balance for the Sales Management Group was established at $93,285.26. Sentinel and the Sales Management Group agreed that there would be no further overwrites earned under the old SMG Contract for business produced after January 1, 1969, and that only overwrites accruing in the future from business produced prior to January 1, 1969 would be applied to liquidate the debit balance on the SMG account.

On March 1, 1969 Stanger and Anderson as co-agents and Sentinel entered into a new General Agent's Contract and Addendum to General Agent's Contract (Anderson-Stanger Contract). The account created as a result of the Anderson-Stanger Contract was denominated "001," whereas Stanger's previous account was "439," and Anderson's under the SMG Contract was "461." Sentinel conceded that under the Modification Agreement the alleged debits of Anderson could have been withheld only from account "461." However, all sums contested in this action were withheld from Stanger and Anderson from the "001" account. Sentinel bases its right to withhold on language contained in each of the Stanger, SMG, and Anderson-Stanger Contracts as follows:

Any debt due from or charged payable by, the General Agent to the Company, by virtue of this contract or otherwise, shall be a first lien on all commissions and benefits accrued hereunder.

The jury returned special verdicts with damages of $27,016.40 to Stanger and Anderson, or a total of $54,032.80. That amount was intended to be the total of the four items listed in defendants' Exhibit D-73, a letter addressed by Sentinel's accountant to its counsel explaining the items Sentinel had withheld from Stanger's and Anderson's commissions. That letter reads:

March 25, 1981

Dear Dwight:

Per your request, please find below my anaylsis [sic] of the major differences between Mr. Stanger's accounting and mine.

$ 53,745.63 Credit balances claimed by Mr. Stanger

k 106.00 Net Debit Balances per Sentinel

--------- Accounting difference as of 2-28-81

$ 53,851.63

1. $ 7,000.00

2. 23,403.95

3. 17,000.00

4. 13,628.85

----------

$54,032.80

1. The $7,000.00 represents the note executed in 1965.

2. The $23,403.95 represents advances to Mr. Stanger during his 2nd contract year of February 1966 through January 1967.

3. $17,000.00 represents advances to Robert Ipsen as sub-agent of Mr. Stanger during period of June 1965 through February 1967.

4. $13,628.85 represents Merlin Anderson's share of Debit created while partner of Sentinel Sales Management Group.

As is shown these major items account for all but $181.17 of the differences.

Fred G. Cheney

Accountant

As can be seen on the face of the letter, the sum total of items 1-4 through clerical error omitted the contested promissory note in the sum of $7,000.00, which, when included, brings the amount of withholdings to $61,032.80. The amounts set forth in that letter and claimed as debits appeared as subsidies and investments in some of Sentinel's corporate documents. The record also indicates that in 1969 the Sentinel Board of Directors was informed that expenses formerly chargeable to individual agents' accounts were to be treated as company expenses. Sentinel did not adduce any evidence in support of its theory that the monies were advanced under a reimbursable "bridge-plan" which tides new salesmen over until such time as commissions are generated. None of the contracts contained such a provision, and only the SMG Contract provides for Sentinel's unilateral discretion to advance expenses from time to time, and to make them reimbursable or non-reimbursable.

In reviewing the special verdicts in favor of the plaintiffs, we will review the evidence in a light most favorable to the findings of the jury, Williams v. State Farm Ins. Co., Utah, 656 P.2d 966 (1982) and uphold them, so long as there is competent evidence to sustain them. Time Commercial Financing Corp. v. Davis, Utah, 657 P.2d 234 (1982) and cases therein cited.

Sentinel contends that both Stanger and Anderson were bound by their written agreements as a matter of law, that the agreements were integrations and were intended by the parties to embody all of their agreements. Thus Sentinel assails the admission by the trial court of parol evidence of the intentions of the contracting parties with respect to the various items and amounts Sentinel had withheld. We will examine each of the four items against this contention:

(1) The $7,000 promissory note. Stanger testified that soon after he entered into the Stanger Contract on March 1, 1965 he found that the $500 per month which Sentinel agreed to pay him for one year (without any obligation of repayment) to assist in the...