*1 simрly trial court appeal. The versal expenses his Brooks for
compensated hearing. This assessment
attending preroga- trial court’s well within the is, therefore, affirmed.
tive part, part reversed Affirmed
[¶ 30.]
and remanded. Justice, MILLER, Chief
[¶ 31.]
SABERS, AMUNDSON, and Justices,
KONENKAMP, concur. JOHNS, Judge, Circuit
GILBERTSON, Justice, disqualified.
Renee Appellee, INSURORS, DAKOTA
WESTERN
INC., Corpora a South Dakota
tion, Appellant. Defendant
No. 20682.
Supreme of South Dakota. April 1999.
Argued
Decided Feb. *2 Quinn, Reynolds Day
Michael P. & Barker, Rapid City, plaintiff appel- lee. Gunderson, Palmer Palm-
J. Crisman er, Roger & Nelson and Dam- Goodsell W. Woods, gaard and L. Carpenter Melanie Fuller, Smith, Rapid City, Shultz & defendant appellant.
KONENKAMP, Justice. Insurers, Inc., [¶ 1.] Western Dakota agency, appeals a decision re- quiring pay of commis- Inc., Systems, sions that First American agency, agreed another insurance employee, Renee Parker. The circuit court reasoned because Western Da- kota purchased First American’s income assets, generating including its “book of business,” thereby incurred obligation honor American’s employee. contract with its We reverse ruling because Western Dakota’s assumption excluded of First affirm liаbilities. We the or- denying der Parker’s claim for en- richment.
Facts employed [¶ 2.] Renee Parker was as a manag- salaried insurance sales Systems er with First American from June pres- 1982 to December 1992. In principal ident and owner of First Ameri- can, Lane, plans Tom made known his expressed retire. Parker concern to Lane If company’s about future. he sold the and remain the new owner would shall be absolute American].... sole of [First all future renewal acquire from the clients Parker the income nurture would be helped to build and had shall inure to remain with To induce Parker lost. binding upon the benefit of and shall be not to and to bind her *3 American], its successors and as- [First later company should she compete with the signs, including without limitation leave, on behalf of agreed Lane choosе or person, partnership, . percentage American to may [acquire] substantially all or which received af- the commissions the American’s] all of assets and busi- [First 2, employment ter her ended. On June which [First American] ness or unto agreement in they executed a written merged. It be consolidated or re- they writing “set forth in their is, further that this duties, responsibilities spective rights, however, unto personal shall agreement The stated entitlements.” assignable by not be Parker.... part: (3) employ- Upon termination of her In Lane October sold First [¶ 3.] ... she American] ment with [First American to E.J. Smith and First Ameri- percentage to that as shall be entitled Company. In the new Holding can forth of renewal commis- hereinafter set company’s owners informed [First American] sions received their commissions were to be sub- agеnts sold, and handled products all serviced stantially and new decreased commission the term of this producer during to be Par- agreements signed. would need Ameri- long [First for so as agreement under her percentage ker’s of renewals with the renews can] Not agreement would thus be reduced. company. same insurance carrier or wanting give up rights, her contract she renewal percentage Parker’s for such In resign elected December Ameri- [First commissions paid her in accord First American (50%) fifty for all percent shall be can] of her contract. paragraph with three point five group fifty-six health and two When, Parker learned (56.25%) products all other percent again, American was about to be sold entitlements insurance. Da- competing agency, to а Western time hereunder, monthly any, shall be kota, president, Gary spoke with its commencing upon termination of her him if he was aware Larson. She asked employment.... a contract with First Ameri- that she had Da- responded that Western
can. Larson in the obli- kota was “not interested (6) agrees expressly that if a gations” of First American and and all insurance busi- states it would be of the purchase place, took any time or times secured ness at assets.” of business and selected “books by [First while contracted [Parker] American], May pur- Dakota the term during [¶ 4.] or substantially all First American’s chased perma- is and shall be the These assets generating assets. nent and exclusive income lists, or customer American], relating consisted of “all client and that all records dates, business, and renewal including expiration limita- including to its without data, and all information, all insurance dailies personnel in- customer tion financial respect formation, and information lists of customers and ac- records thereto, information, commis- counts, files and renewal and sales formula, purchase dates, Based on a and use and control of sions.” expiration of “the fixed to a price all expirations of appeals, from the of the busi- Dakota renewals rais to be as being purchased,” separate legal ness re- eleven issues. We con years. period disposi- ceived over a No stock following questions sider the two (1) place part pur- transfers took as tive: Did expressly and no director or share- agreement, chase assume impliedly purchase or holder of First American was made a di- Agreement pur when it entered into the rector or shareholder Western Dakota. chase American? specifically exclud- Was Western Dakota entitled to dis ed “any [First American’s] debts or missal of Parker’s claim enrichment payable accounts and other liabilities.” of law? as matter Our review is de novo paid First interpretation question as contract is a $100,000 Airheart, in advance to applied toward law. Olsen v. *4 (S.D.1995). of commissions it would 572
pay in the future. Although agreement
[¶ 5.] Parker’s enti- Analysis and Decision portion tled her to a of First American’s Assumption Agree- of the Parker commissions, First American never shared ment any with her part of Western Dakota’s payments. pur [¶ 8.] Neither did Western Dakota’s asset Western Dakota her, chase did not or any payments make even after list include reference Indeed, Agreement. pur demanded that it honor her contract. Fol- Dakota, lowing specifically chase sale Western excluded Nonetheless, liabilities. Chapter bankruptcy filed for argues Parker operations. purchasing and business that ceased Travelers creditor, Indemnity Company, to renewal as secured expressly remaining impliedly took control of the Dakota either or assets and as them, sold sumed the terms and accumulating approximately conditions of the million to over million in liabili- $1.8 $2
ties. A obligation or Parker sued Western Dakota for dinarily due to those with whom is contract, conversion, breach of made, generally corporations purchas enrichment. The circuit court reviewed corporations assets of other will not be the First American-Western Dakota subject to the sellers’ liabilities. Hamaker agreement, unambiguous, found it Mach., Inc., v. Kenwel-Jackson that, law, ruled as a matter (S.D.1986) (citing N.W.2d Lean obligated became Parker be- Cincinnati, Inc., nais v. 565 F.2d “purchased” cause it Parker’s contract (7th Cir.1977); Downtowner, Inc. v. with First American. Consequently, the Inc., Acrometal Prod. granted court judgment to Parker on her (N.D.1984)). Nonetheless, finding courts claim for breach of contract. liability With linkages certain buy between a seller and decided, issues only question remain- corporation er will in some instances con ing was the amount damages. The that an clude asset carries with parties agreed jury to waive a trial and to liabilities attendant with those assets. try damage issue to the court. In its exceptions developed Four have to create judgment, the court ruled liability: successor $34,102 Dakota owed Parker in back com- Moreover, (1) pensation. in accord with the purchasing corporation when the ex- pressly impliedly agrees or to as- also ordered pay monthly per- sume selling corporation’s liabili- centage ty; of commissions received. Buyer, free The shall sell to to a Seller
(2)
amounts
the transaction
when
encumbrances,-
and clear of liens
pur-
merger
or
consolidation
However,
un-
expressly
it is
Business.
corporations;
seller
chaser and
Buyer is not
derstood
(3)
purchaser
when the
receivables,
hand,
purchasing cash
of the seller
merely a continuation
buyer agreed
to assume
nor has
corporation;
payable
or accounts
debts
Seller’s
into
is entered
the transaction
when
liabilities.
other
liability for
escape
fraudulently to
unambiguous.
language is clear and
obligations.
excluded
agreement expressly
&
Mach.
v. Johnson
(citing
Jones
of First American’s debts
assumption
Co.,
724, 820 N.W.2d
211 Neb.
Press
unambiguous
“An
con-
and liabilities.
(1982)). Here,
only the
examine
we
purchaser
the seller and
tract between
that is the one
exception as
first
explicit provisions
corporations,
All
Dakota.
to Western
pertains
believes
any liability for the debts
which exclude
explain,
caution to
exceptions, we
these
predecessor, weighs
and liabilities of
applica-
rules
the traditional
evolved under
can
finding
exception
...
that an
however,
have,
They
law.
corporate
ble to
Mfg.,
Florom v. Elliott
implied.”
law
under the
expansion
undergone some
(10th
denied,
Cir.),
reh’g
F.2d
liability in tort
liability. Strict
of products
*5
purchase
was
that it “shall
American],
binding upon
deciding
an
shall be
siderations
the existence of
assigns, including
without
implied assumption
successors
of liabilities
an in-
partnership,
limitation
or cor-
person,
purchases
stance “where
poration
may [acquire]
all or sub-
compa-
and franchises of аnother
stantially
of [First American’s]
all
assets
ny, including property for which the latter
business[.]”
Western Dakota was not
obligation
was under an
and to
privy
to the Parker
That con-
acquire
which it could
no
without
unilaterally
tract cannot
bind
noncon- payment.
In that
purchasing
case the
traeting party. Parker’s
company impliedly assumes
the obli-
essentially
employ-
Here,
gation.”
however,
Da-
ment contract. Western Dakota never
legally acquired
employed
promised
her and never
that it
renewal commissions and
valuable
would honor First American’s contractual
consideration for them.
employees.
duties to its
fail to
[¶ 15.] We
see how a
Republic
Corp.,
[¶ 13.] In Shaw v.
Drill
to First American’s renewal com-
(7th Cir.1987),
tion.” Id. Co., v. Inc. Guarantee Reserve Ins. Life (N.D.1974) (an argues Parker that 14.] West 217 N.W.2d 460 insur- ern impliedly Dakota agent’s assumed First Amer right ance to commissions on re- ican’s Agree liabilities under the Parker premiums newal depends on the existence purchased ment when it of an employment contract expressly and insurance business and the rights such); to re specifically providing for Cox v. newal Co., commissions. The rep conduct and Ohio Nat’l Ins. 250 Or. 438 Life (1968) (“It parties resentations of to a transaction P.2d general 1000 is a rule may suggest acquiring intent com that a life right has no to pany to selling assume the liabilities of the renewal commissions after termination of corporation. Fletcher, Cyclopedia 15 W. agency, except his as his contract with the them.”). § of the Law Corporations of Private 7124 company provides fоr Perhaps ed.1999). (perm, many One of valid con- had Parker obtained a UCC lien on the
187
Juttelstad,
in Juttelstad
v.
pres
not be in her
enrichment
she would
Unjust
1998 SD
Armstrong Wash.2d Western Dakota. SABERS, Justice, “in- The Parker states that the had deemed developed by Parker surance business” parties all and disqualified, and himself and permanent “shall be the exclusive disqualification. said counsel waived ...,” American] of [First GILBERTSON, (dissenting). pur- Justice that the “insurance was business” by chased Western Dakota. Parker has Claim
Parker’s Contract However, denied this. never is en- Agreement specifically states Parker Da- concludes Western 28.] The Court a percentage titled to of the commissions Agree- by was not the Parker bound develops respect with to the business. It states Dakota ex- ment. also Therefore, though the busi- even any of responsibility eliminated pressly was American and ness sold First obligations. Es- First American’s debts Dakota, bought applicable sentially, opinion the Court’s concludes of the renewal commissions percentage legal recourse because without previously promised was its to re- right when First American sold Parker, Agreement speci- as the Parker Da- renewal commissions Western ceive Lane, fact, fies. both Parker Tom kota, First American was one negotiator signatory Parker, not Western promise broke Agreement for First testified disagree I respectfully Dakota. very purpose of the Parker opinion. Court’s protect was to Parker’s entitlement to the renewal commissions. Paragraph percentage of the Parker ten Lane testified: binding upon will be Agreement specifies it substantially me, all any party acquiring Q: you please, all or tell Could ability, your purpose and business. what the American’s assets best your 10 was in mind. May Paragraph Dakota did sub- On 1994 Western all of purchase substantially (Lane) Well, sequently guess A: I to remove existing American’s then if concern that we sold [Parker’s] purchase Ameri- go In its of First and it somebody away business. this would all That, assets, know, I assumed the on. was can’s continue real concern of hers at time. She Agree- and conditions the Parker terms us, know trusted she didn’t knew and ment: there, type who else would being purchased means and The assets thing. lists, in- includes all client or customer Q: your Was intention based Okay. dates, cluding expiration and renewal agency then paragraph on this data, all dailies customer sold, i.e., substantially all' of were all or respect all and information with records American’s] assets [First thereto, com- files contract would continue [Parker’s] then (the “Business”), missions, (emphasis company that purchased on with the added). those assets? Yes, yes. A: opinion The Court’s concludes Western to First Dakota’s Moreover, Agreement states did not renewal commissions entitled to “.... Parker shall be Ameri- equal legal assumption reneiual set percentage hereinafter forth of of its promise American] can’s share commissions The Court’s Parker. and handled products all sold serviced *9 Agreement “Parker had no title or own- term this opinion during states her the added). Further, the insur- ership (emphasis American’s ...” interest “Parker’s entitlements Agreement states ance or renewal commissions.” business hereunder, monthly shall any, be forth in the Parker Agreement prior made commencing her em- upon termination of asset purchase.” to thе ployment. specifically ..It addressed [¶26.] The Court correct when it is the issue us with clause: now before this general the is that a corpora states rule shall inure to the bene- purchasing tion the assets another cor binding upon fit of and shall poration subject will not be to the liabili American], assigns, successors and its seller, ties of the four exceptions and that including any person, without limitation developed have to rule. v. the Hamaker corporation partnership, which Mach., Inc., Kenwel-Jackson require substantially all or all of [sic] (S.D.1986) (citing Leannais [First American’s] assets and business[.] Cincinnati, Inc., (7th F.2d correctly The trial court fact found as Cir.1977)). However, the basis for this knew of the existence of corporate traditional law doctrine is that the Parker Agreement before it entered corporate “a sale of assets transfers an purchase agreement. into the separable corporate interest from the enti [¶ 25.] When purchased Western Dakota ty and does not result transfer of assets, it unbargained-for liabilities from the seller rights those to renewal commissions First purchaser.” Armstrong Hall v. buyer A could sell. no receives Inc., Cork, 103 Wash.2d 692 P.2d better title than the seller can provide. rationale this rule Michigan Coleman, Mut. Ins. Co. v. Life purchasing corporation should re (1907), 118 Tenn. 100 S.W. protection traditionally ceive the same giv indeed, the pro- “[t]here court stated: any purchaser en of property. to that, vision in the contract the upon termi- Thus, “the bona fide purchaser gives time, nation of the contract at the adequate consideration and who lacks no had the ‘to the transfer prior tice claims business’ of any person may to it acquires no liability for those claims.”2 choose; but no means includes Eagle Insurance Co. v. Christen Pacific rights of property and interest in renewals sen Yacht Corp., Motor 135 Wash.2d already accrued, merely the transfer of 1052, 1055 Hall, 959 P.2d (citing the agency.” First American did have 790) added). P.2d at (emphasis the exclusive to all renewal commis- Dakota, pay while did consideration for sions. Pursuant to assets, First American’s had actual notice Parker, First American Parker Agreement before pur upon employment, termination her 50% Thus, was complete. chase Western Da for group health and 56.25% or all other kota knew Parker a claim against had products of insurance in renewal commis- Thus, certain sions. trial court of renewal was correct in commis sions, finding and when it ‘right purchased “right that “the renewal com- missions’ referenced renewal commissions” of First subject also purchased set receiving has been 2. The relying Court criticizes this purely explain dissent for case was cited the rationale Eagle Certainly That case involves behind this rule. it aids the reader Pacific. exception fourth apply understanding that does not to this explicit corpo- rule of however, adhere, Eagle case. does explicit rate law. It is an rule because it is Pacific relies, upon the rule good public policy protect purchas- "[n]or- those mally, ing corporations when a sells its assets to knowledge that have no corporation, purchasing corpora- another any prior against property claims of the sell- However, tion ing corporation. does not become liable for the debts of purchasing those 1055; the selling corporation.” 959 at corporations knowledge prior P.2d claims Hamaker, see also granted protection. N.W.2d at 518. This not be should
191 tied to renewal commissions the amount procured commissions of renewal benefits group policies of for health 50% Parker, follow that it it should by policies 56.25% for all other insurance running the accept also burdens should “sold, her,” by and handled serviced with them. payable to her the commissions were agent an of right 27.] The year policies the “were each recog has been renewal commissions his American, in thereafter renewed prоperty right.3 nized as a substantial company or carrier.” same 746, Grimes, P.2d 748 v. 740 Cockrell Indeed, right has been held that “[t]he- (Okla.App.1987); General Life an to commissions on renewal agent of Roach, 301, 65 v. 179 P.2d Co. Okla. Ins. by the of premiums is determined terms 127; (1937); Coleman, at 100 S.W. 460 Wagner employment.” his contract Ass’n., 123 Farmers’ Schrimplin v. Life (1931). Land, 225, 4 P.2d 84 152 Okla. (1904); 613, 617 Hercu N.W. Iowa case, In employment contract pf Brinker, 77 Assurance v. Mutual les Life to receive' commis provides was 10724, at *6 WL N.Y. premiums even after ter sions on renewal rel. Palmer v. Peoria People also ex See contract and employment mination of Co., Ill. N.E.2d Ins. American, Life by of assets as sale (“An (Wilson, J., dissenting) 833-34 long premiums were to its as the right his to renewal does not lose agent Cockrell, P.2d at successor. by receivership ... by the court in Cockrell principlе stated its poli the transfer of issuing company or this case: applies to 4 Couch on company.”); to a cies successor portion premi- Under Roach that (“The (3d ed) § 57:44 successor Ins. which constitutes Cock- ums collected insurer be bound continue original commissions are- not assets of rell’s agents insurer, premiums are vested pay insolvent insurer.”). Cockrell, property to a and are held agent’s “The original long him. As as the insurance trust for policy premium is percentage of policies by are in effect written Cockrell as right which becomes fixed being paid on those premiums are out, policy as taken then soon pre- the commissions on those policies, actually are premiums realized when vested separate, miums is Cockrell, 740 from time to time.” and not the assets of Cockrell (citing at Wear v. Farmers & P.2d insolvent insurer. (Alaska Bank, Merchants P.2d 1980)). here, Similarly by conclusion, SDCL of a contract type
with First American authorized 58-30-86, by 58- specifically was was authorized SDCL enti- provided obligations -portion an agent’s right receive com- tractual 3. An insurance en- to Parker are an insurance commission is based mission from an insurance property right based forceable on contract. upon a was an insurance contract. Parker recognizes the specifically SDCL 58-30-86 "agent” 58-30-1 as she as defined SDCL types long as legality these as of contracts was licensed the Director of the Division Insurance, parties agents: both contract are However, "right” as an her sell insurance contracts that are to solicit and may directly soliciting agent or agent or No directly not flow relevant to this suit does indirectly commissions or other share his company. between and the insurance compensation or to be received received employee capaci- in various She worked as under his him on account of a transaction employer, ties for her any person not also licensed license "agent" chapter also an within the definition of was as to the same kind under this payment when 58-30-1. Her in such transac- SDCL of insurance involved kinds were her em- this section is a Class the commissions tions. Violation of sold, also ployer on based misdemeanor. Therefore, authority persuasive are such these cases upon contract. the above-cited As position. authority premise Parker's are for the that con- cases *11 192 unjustly it. The contract stated that Parker’s Parker would enrich Juttel
30-86.
¶
Juttelstad,
121,
to
even if the policies
19,
were
continue
1998
stad
SD
by
assigned
she sold
First American
were
(citing Bollinger v.
N.W.2d
El
of
to
Western Dakota knew the
another.
(S.D.1994)).
dredge, 524 N.W.2d
purchased
it
First Ameri-
contract when
Western Dakota received a benefit as it is
purchased
it
can’s assets. When
receiving
poli
commissions from insurance
assets,
bound
Western Dakota
cies,
by
pursu
which had been sold
Parker
Agreement.4
itself
Parker
As such
to the
to the
Agreement.
ant
Parker
When
I
the trial court on
issue.
would affirm
this
purchased
Western Dakota
the assets of
it
the
knew of
Unjust
Enrichment Claim
poli
Parker had
these
sold
sought recovery
in the
in
working
competitor
lieu of
for a
cies
unjust
on the basis of
alternative
enrich-
to now allow
to
Western Dakota
retain the
ment. The sole
Western Dakota
reason
(in
full 100% of the
comparison
commission
prevailed
is
trial
on this claim because the
by
to 50% and 43.75% retained
already
Par-
granted
upon
court had
relief
American) for policies
part
it had no
pre-
ker’s
claim.
For
to
selling unjust
is
enrichment.5
unjust
vail on a claim of
enrichment
Conversion
(1)
must establish:
Western Dakota has
(2)
benefit,
30.] “Conversion is the
act
exercis-
received a
Western Dakota is
(3)
benefit;
cognizant
the
control
personal
the reten-
or dominion over
tion of the
reimbursing
benefit without
in a
repudiates
manner that
the
Majority
4.
Pap,
The
faults the dissent for "failure
correct. See Crookv.
authority
(S.D.1981)
any
private
to
per
(citing
cite
that holds that a
curiam
Custer
employer
Cоunty
between an
and an em-
Bd.
Ed. v. State Commission on
ployee
receipts,
binding
Ed.,
to share future
is
on
Elementary
Secondary
86 S.D.
purchaser
corporate employer’s
a later
(burden
the
trust was for Parker to the extent
became a trustee interest
of her renewal commission Palmer, at 834 See 34 N.E.2d
premiums. J.,
(Wilson, wrong- dissenting). One who fully thing a of value breach detains SD 15 contract, unjust enrichment or conversion Kaiser, Rodney Marlys KAISER and for benefit of the implied an trustee Appellees, Plaintiffs a gains 55-1-7. One owner. SDCL v. act, he thing unless by wrongful of value thereto, has other and better some RIVER INSURANCE CO. NORTH an implied holds the item as trustee & Forster Insurance Crum d/b/a other- person who would benefit Co., Appellant. Defendant 55-1-8; had Rosebud wise have it. SDCL No. 20946. Strain, Tribe N.W.2d Sioux (S.D.1988). If the Supreme of South Dakota. Parker, are not 1999. Considered Briefs Nov. contrary windfall will “receive a will toler- principle equity familiar Decided Feb. 2000. Palmer, 34 ate enrichment.” at N.E.2d upon Parker’s commissions vested insur- of commissions
payment party to re-
ance entitled them, be it First American or West-
ceive money earned
ern Dakota. Dako-
is her not that of Western property, Dako-
ta. A will result Western windfall keep
ta allowed to Parker was
of renewal commissions. productive employee of First
valuable helped She almost decade. busi- book of insurance significant
build there, by con- during tenure
ness require
tract is entitled to