Tvedt v. FARMERS INS. GROUP OF COMPANIES

• Decision Date: 12 May 2004
• Docket Number: No. 02-523.,02-523.
• Citation: 91 P.3d 1,2004 MT 125
• Parties: Lyle Leroy TVEDT, and L.L. Tvedt Insurance, Inc., Plaintiffs and Appellants, v. FARMERS INSURANCE GROUP OF COMPANIES; Farmers Insurance Exchange; Truck Insurance Exchange; Mid-Century Insurance Company; Farmers New World Life Insurance Company; and Farmers Group, Inc., Defendants and Respondents.
• Court: Montana Supreme Court

91 P.3d 1

2004 MT 125

Lyle Leroy TVEDT, and L.L. Tvedt Insurance, Inc., Plaintiffs and Appellants, v. FARMERS INSURANCE GROUP OF COMPANIES; Farmers Insurance Exchange; Truck Insurance Exchange; Mid-Century Insurance Company; Farmers New World Life Insurance Company; and Farmers Group, Inc., Defendants and Respondents.

No. 02-523.

Supreme Court of Montana.

Submitted on Briefs April 3, 2003.

Decided May 12, 2004.

Rehearing Denied June 9, 2004.

For Appellants: Curtis G. Thompson, Thompson, Potts & Donovan, Great Falls, Montana.

For Respondents: Mark D. Parker, Parker Law Firm, Billings, Montana.

Justice JIM RICE delivered the Opinion of the Court.

¶ 1 Plaintiffs Lyle LeRoy Tvedt and L.L. Tvedt Insurance, Inc. (Tvedt), appeal the May 23, 2002, opinion and order of the Fourth Judicial District Court, Missoula County, wherein the court granted summary judgment in favor of Farmers Group of Companies (Farmers) on his claims for breach of contract, wrongful discharge, and indemnification of employment expenses. We affirm in part and reverse in part.

¶ 2 Tvedt presents the following issues on appeal:

¶ 3 1. Did the District Court err in granting summary judgment to Farmers on Tvedt's two breach of contract claims: (a) the implied covenant of good faith and fair dealing; and (b) waiver of the "at will" termination clause?

¶ 4 2. Did the District Court err in granting summary judgment to Farmers on Tvedt's wrongful termination claim?

¶ 5 3. Did the District Court err in dismissing Tvedt's claims for business expense indemnification?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 6 Tvedt commenced working as an insurance agent for Farmers in 1978. Eight years later, on December 1, 1986, when Farmers offered Tvedt the position of District Manager in Missoula, Tvedt entered into a contract with Farmers called the District Manager's Appointment Agreement (Manager's Agreement). The Manager's Agreement appointed Tvedt as "District Manager."

¶ 7 On February 10, 2000, after serving thirteen years as District Manager, Tvedt formed a corporation called L.L. Tvedt Insurance, Inc., which, according to his affidavit, was for the purpose of facilitating operation of an incorporated insurance agency for tax purposes.

¶ 8 On January 8, 2001, a second agreement, called Corporate District Manager Appointment Agreement (Corporate Agreement), was entered into, this time between L.L. Tvedt Insurance, Inc., and Farmers. The Corporate Agreement appointed L.L. Tvedt Insurance Agency, Inc., as "District Manager," and Tvedt, individually, as "Supervising District Manager."

¶ 9 The Manager's Agreement and the Corporate Agreement (collectively, Agreements) contained several mutual clauses applicable to this appeal. Both agreements contained an "at will" termination clause which permitted cancellation of the agreement by either party without cause on thirty days' written notice. Further, both agreements contained a "contract value" clause which established a liquidated value of the contract based upon years of service with the company. The Corporate Agreement provided that, in the event Farmers terminated the agreement, Farmers would pay the liquidated sum to the terminated party. The Manager's Agreement also required a compensation payment by Farmers upon termination, but provided that an amount less than the "contract value" could be negotiated by the parties. Both agreements contained an "independent contractor" clause which stated that nothing in the agreement was intended to create an employer-employee relationship, but, rather, that district managers worked in the capacity of an independent contractor.

¶ 10 In 1996, Farmers published District Manager Performance Standards and Expectations (Standards) which set forth standards for district managers, including Tvedt. In 1998, Farmers published a second edition of the Standards which included, inter alia: (1) a clause indicating the Standards would be applied to determine renewability of district managers' contracts, and (2) a clause indicating the Standards in no way modified Farmers' right to terminate on thirty days' notice.

¶ 11 Tvedt has maintained throughout the dispute with Farmers that, as District Manager, he met and often exceeded the criteria delineated in the Standards. Tvedt asserted that in the year 2000, his production of insurance sales exceeded the production quotas, as follows: 163 percent of life insurance, 128.4 percent of automobile insurance, 104.4 percent of commercial insurance, and 109.1 percent of fire insurance. In the first three months of 2001, Tvedt alleged similarly high percentages.

¶12 Nonetheless, on March 6, 2001, Tvedt received the first of a series of letters from Bruce H. Gordon, Division Marketing Manager for Farmers, criticizing his performance as District Manager. Shortly thereafter, on May 16, 2001, Tvedt received a termination letter from David Dela Torre, State Executive Director for Farmers, giving him thirty days' written notice of termination of employment, without cause, effective June 15, 2001. Enclosed with the termination letter was a Notice of Termination of Appointment Agreement(s) and Agencies which stated:

Please be advised that any and all appointment agreements and any and all agencies existing between you and the undersigned, and any and all appointments, whether as District Manager or as District Agency of and for the undersigned, are hereby terminated pursuant to the terms of said agreement(s); said termination to be effective as of the termination date shown above [June 15, 2001] without further notice.

On June 28, 2001, Farmers issued, at Tvedt's request, another termination letter along with another Notice of Termination of Appointment Agreement(s) and Agencies, which extended the effective termination date to June 30, 2001.

¶ 13 Pursuant to their agreements, Farmers calculated Tvedt's "contract value" to be $313,225.00 on the basis that Tvedt, at the time of termination, had worked fourteen years, seven months for Farmers. On August 13, 2001, Farmers issued Tvedt a check representing the first of four equal "contract value" installment payments. Although the record makes reference to further payments, the total amount which has been paid to Tvedt is not specified therein.

¶ 14 On December 12, 2001, Tvedt brought a three-count complaint against Farmers for breach of contract, wrongful termination, and indemnification of expenses. Tvedt alleged Farmers had breached the covenant of good faith and fair dealing, had waived the "at will" clauses in the Agreements by its actions, and had erroneously characterized him as an "independent contractor" rather than an "employee." Claiming employee status, Tvedt sought relief under Montana's Wrongful Discharge from Employment Act (WDEA), set forth in § 39-2-901, et seq., MCA.

¶ 15 On February 13, 2002, Farmers moved for summary judgment. On May 8, 2002, while its motion for summary judgment was still pending, Farmers filed an answer and contingent counterclaim whereby the counterclaim would not be pursued if the District Court dismissed Tvedt's complaint pursuant to Farmer's outstanding motion for summary judgment. Farmers' counterclaim stated that, in the event the District Court found that Tvedt was an "employee" of Farmers, then Farmers' obligations to pay Tvedt his "contract value" should cease, and all payments to Tvedt should be returned.

¶ 16 On May 23, 2002, the District Court entered its opinion and order granting Farmers' motion for summary judgment on all claims. Tvedt appeals.

STANDARD OF REVIEW

¶ 17 This Court's standard of review in appeals from summary judgment rulings is de novo. Meyer v. Creative Nail Design, Inc., 1999 MT 74, ¶ 13, 294 Mont. 46,

¶ 13, 975 P.2d 1264, ¶ 13. See also Treichel v. State Farm Mut. Auto. Ins. Co. (1997), 280 Mont. 443, 446, 930 P.2d 661, 663 (citing Motarie v. Northern Mont. Joint Refuse Disposal Dist. (1995), 274 Mont. 239, 242, 907 P.2d 154, 156). This Court reviews a summary judgment order entered pursuant to Rule 56, M.R.Civ.P., based on the same criteria applied by the district court. Meyer, ¶ 13; Treichel, 280 Mont. at 446,

930 P.2d at 663.

¶ 18 In proving that summary judgment is appropriate:

[t]he movant must demonstrate that no genuine issues of material fact exist. Once this has been accomplished, the burden then shifts to the non-moving party to prove, by more than mere denial and speculation, that a genuine issue does exist. Having determined that genuine issues of fact do not exist, the court must then determine whether the moving party is entitled to judgment as a matter of law. [This Court] review[s] the legal determinations made by a district court as to whether the court erred.

Bruner v. Yellowstone County (1995), 272 Mont. 261, 264-65, 900 P.2d 901, 903 (citations omitted). In order to be granted summary judgment, the "moving party has the burden of showing a complete absence of any genuine issue as to all facts considered material in light of the substantive principles that entitle the moving party to judgment as a matter of law and all reasonable inferences are to be drawn in favor of the party opposing summary judgment." Meyer, ¶ 15 (citing Kolar v. Bergo (1996), 280 Mont. 262, 266, 929 P.2d 867, 869).

DISCUSSION

Issue 1

¶ 19 Did the District Court err in granting summary judgment to Farmers on Tvedt's two breach of contract claims: (a) the implied covenant of good faith and fair dealing, and (b) waiver of the "at will" termination clause?

¶ 20 Tvedt alleges that Farmers breached both Agreements by terminating the contracts without good cause and with inadequate notice, constituting a breach of the covenant of good faith and fair dealing implicit in both Agreements. We first address Tvedt's assertion that Farmers breached the Agreements on grounds of inadequate notice. Tvedt asserts that he received the first notice of termination on May 16, 2001, with an effective date of June 15, 2001, but Farmers did not...