Wright v. Dave Johnson Ins. Inc.
| Decision Date | 22 February 2012 |
| Docket Number | No. 40531–8–II.,40531–8–II. |
| Court | Washington Court of Appeals |
| Parties | John H. WRIGHT, a married man, Appellant, v. DAVE JOHNSON INSURANCE INC., a Washington Corporation, David L. Johnson and Beverly M. Johnson, husband and wife, Respondents. |
OPINION TEXT STARTS HERE
Jeffrey A. Damasiewicz, Attorney at Law, Aberdeen, WA, for Appellant.
Thomas Avery Brown, Brown Lewis Janhunen & Spencer, Aberdeen, WA, for Respondent.
¶ 1 David Johnson hired his son-in-law, John Wright, to help him run Johnson's new insurance agency. When relations between the two soured, Wright quit and took with him Johnson's personal insurance policies that Johnson had given to Wright so Wright could use the proceeds from the policies to buy the insurance agency should Johnson die. Johnson, with his wife and the agency (the Johnsons), sued Wright for return of the policies, and Wright counterclaimed for compensation from the agency that Johnson allegedly promised but did not pay. Following a bench trial, the trial court ordered Wright to return the policies to Johnson and ordered Johnson to reimburse Wright for the premiums that Wright had paid thereon. The trial court also awarded the Johnsons fees and costs for Wright's frivolous counterclaim and defense. Wright appeals, arguing in part that the trial court improperly added a return provision to the parties' buy and sell agreement, applied an incorrect interest rate, and improperly awarded fees and costs to the Johnsons. We hold that (1) the trial court did not err in ordering the return of the insurance policies to Johnson; (2) the trial court imposed an erroneous interest rate on Johnson's reimbursement payments to Wright; and (3) the Johnsons are entitled to statutory costs and fees only. We affirm in part, reverse in part, and remand.
¶ 2 In Spring 1998, David Johnson hired his son-in-law, Wright, to help with Johnson's newly formed business enterprise, Dave Johnson Insurance, Inc., a Washington corporation. located in Aberdeen. Johnson had extensive insurance experience and, although Wright had no similar experience, Johnson believed that Wright could contribute needed bookkeeping, accounting, and computer skills. Wright began his employment as the corporation's bookkeeper, but his job title changed to agency manager after he was properly licensed as an insurance agent.1
¶ 3 Johnson's intention in hiring his son-in-law was that Wright would ultimately become the agency's “perpetuation” or successor to the business. Clerk's Papers (CP) at 104. On August 20, 2001, the corporation and its principal shareholders, David and Beverly Johnson, entered into a buy and sell agreement with Wright regarding the corporation. This agreement provided Wright with a right of first refusal in the event of David Johnson's death or incompetency, and it also provided an express method of valuation for the business. The agreement provided that Wright's purchase of the business could be funded by life insurance. The agreement also provided that “if [Wright] shall cease employment with the corporation, this agreement shall become null and void.” CP at 114.
¶ 4 Contemporaneous with the buy and sell agreement, Johnson transferred two personal life insurance policies providing payment of $100,00.00 each in the event of Johnson's death to Wright. Johnson testified at trial why he did so, explaining that Wright was “continually complaining about not having any money,” and, thus, Johnson believed that Wright lacked the financial means to execute the buy and sell agreement in the event of Johnson's death.2 Report of Proceedings (RP) (Nov. 3,2009) at 80. Johnson said that he transferred his existing life insurance policies to Wright for the purpose of giving Wright the financial ability to execute the buy and sell agreement, if Johnson died; and that he specifically, told Wright that was the reason for transferring the policies.
¶ 5 Johnson testified that he and Wright had “a clear understanding” that the transfer of Johnson's life insurance policies to Wright was for the purpose of funding the buy and sell agreement, and for that purpose only. RP (Nov. 3, 2009) at 85. Johnson vehemently rejected any suggestion that the transfer of the insurance policies to Wright was a gift, a “thank you,” for Wright's efforts in building the agency. RP (Nov. 3, 2009) at 82.
¶ 6 Wright testified that Johnson transferred the life insurance policies to him within a month of their execution of the agency buy and sell agreement, that the two policies were worth $100,000 each, and that “Mr. Johnson stated to me that these [policies] were his gift to me.” RP (Nov. 4, 2009) at 109.
¶ 7 By the beginning of 2005, Johnson and Wright's relationship had deteriorated. Johnson testified that Wright constantly complained that he was not being paid enough. In March, Wright and Johnson got into an argument; Wright told Johnson that Johnson could no longer have any contact with Johnson's daughter or grandchildren (Wright's wife and children). Johnson then demoted Wright from agency manager to an agency employee.
¶ 8 On March 29, the corporation and Wright entered into an employment agreement that provided for certain duties for Wright as a corporate agent. This agreement provided that either party could terminate the agreement. The agreement also required Wright, upon termination of employment, to return all confidential information belonging to the corporation.3
¶ 9 Wright resigned on June 20, 2005. Wright did not return the insurance policies when Johnson requested that he do so. David and Beverly Johnson and the corporation (referred to collectively hereafter as the Johnsons) sued Wright to recover the insurance policies and some other items that Wright allegedly took from the business.4 The Johnsons' complaint sought in part a judgment declaring that the insurance policies were the property of the corporation and directing Wright to transfer ownership of the policies to the corporation. Wright filed a counterclaim seeking damages, contending that Johnson fraudulently induced him to leave his home and job in another state and come to Washington to work for the corporation.5 Contending that Johnson did not fully perform to the extent promised, Wright asserted claims for breach of contract, fraud, promissory estoppel, detrimental reliance, unjust enrichment, and quantum meruit.
¶ 10 During a three-day bench trial, Johnson and Wright testified as described above. Johnson also testified that he and Wright never discussed what would happen to the insurance policies if Wright's employment terminated. Johnson admitted that neither the buy and sell agreement nor the employment agreement expressly required Wright to transfer ownership of the insurance policies in the event that Wright's employment terminated.
¶ 11 The trial court made oral and written findings and conclusions. Noting that the case turned on “credibility and the intent of the parties,” the court ruled that Johnson's transfer of the insurance policies on his life was not a gift to Wright but, rather, the parties intended them to serve as a source of funds to enable Wright to purchase the agency in the event of Johnson's death. RP (Nov. 5, 2009) at 310. The court specifically ruled that Wright's testimony to the contrary was not credible.
¶ 12 The court also dismissed Wright's counterclaims as without merit, again noting that Wright's testimony was not credible. The court ruled that the insurance policies at issue had been Johnson's personal policies, rather than corporate assets, and, thus, would be returned to Johnson. The court ordered Wright to return the insurance policies to Johnson, and it ordered Johnson to reimburse Wright for any premiums that Wright had paid on the policies, with interest.
¶ 13 After the trial court entered judgment, the Johnsons moved for an award of costs and attorney fees under RCW 4.84.185. The trial court found that Wright's defenses and allegations in his counterclaim were “frivolous and advanced without reasonable cause,” and it awarded the Johnsons their attorney fees and costs as the prevailing party. CP at 370. Wright appeals.
¶ 14 This case largely turns on the initial inquiry: Whether there was any agreement (written or oral) between the parties requiring Wright to return the insurance policies in question to Johnson in the event of Wright's employment termination. For the reasons we discuss below, we affirm the trial court's order requiring Wright to return the insurance policies to Johnson and requiring Johnson to reimburse Wright for premiums paid on the policies while in his possession.
¶ 15 The touchstone of contract interpretation is the parties' intention, which we attempt to determine by focusing on the agreement's objective manifestations. State v. R.J. Reynolds Tobacco Co., 151 Wash.App. 775, 783, 211 P.3d 448 (2009), review denied, 168 Wash.2d 1026, 228 P.3d 18 (2010). We give words their ordinary, usual, and popular meaning unless the entirety of the agreement evidences a contrary intent. R.J. Reynolds Tobacco Co., 151 Wash.App. at 783, 211 P.3d 448. If relevant for determining mutual intent, we may use surrounding circumstances and other extrinsic evidence to determine the meaning of specific words and terms used, but not to show an intention independent of the instrument or to vary, contradict, or modify the written word. R.J. Reynolds Tobacco Co., 151 Wash.App. at 783, 211 P.3d 448. When interpretation depends on factual determinations such as the credibility of extrinsic evidence or a choice among reasonable inferences to be drawn from extrinsic evidence, we review the fact finder's determinations of such matters for substantial evidence. Berg v. Hudesman, 115 Wash.2d 657, 668, 801 P.2d 222 (1990); cf. Callecod v. Wash. State Patrol, 84 Wash.App. 663, 676 n. 9, 929 P.2d 510 (199...
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