Renee Parker v. Western Dakota Insuror's Inc.

Insurance Commissions - Unjust Enrichment - Renee Parker was employed as a salaried insurance sales agent
and manager with First American Systems from June 1982 to December
1992. In 1988, the president and principal owner of First
American, Tom Lane, made known his plans to retire. Parker
expressed concern to Lane about her future. If he sold the
company's insurance business, the new owner would acquire all
future renewal commissions, and the income from the clients Parker
had helped to build and nurture would be lost. To induce Parker to
remain with First American, and to bind her not to compete with
the company should she later choose to leave, Lane agreed on
behalf of First American to pay her a percentage of the
commissions the company received after her employment ended. On
June 2, 1988, they executed a written agreement in which they "set
forth in writing their respective rights, duties, responsibilities
and entitlements."

In October 1988, Lane sold First American to E.J. Smith and
First American Holding Company. In 1992, the new owners informed
the company's insurance agents their commissions were to be
substantially decreased and new commission agreements would need
to be signed. Parker's percentage of renewals under her agreement
would thus be reduced. Not wanting to give up her contract rights,
she elected to resign in December 1992. In 1993, First American
paid her in accord with paragraph three of her contract. When, in
1994, Parker learned that First American was about to be sold
again, this time to a competing agency, Western Dakota, she spoke
with its president, Gary Larson. She asked him if he was aware
that she had a contract with First American. Larson responded that
Western Dakota was "not interested in the obligations" of First
American and that if a purchase took place, it would be of the
"books of business and selected assets."

In May 1994, Western Dakota purchased substantially all First
American's income generating assets. These assets consisted of
"all client or customer lists, including expiration and renewal
dates, customer data, all insurance dailies and all records and
information with respect thereto, files and right to renewal
commissions." Based on a formula, the purchase price was fixed to
a percentage of "the commissions from the renewals of the business
being purchased," to be paid as received over a period of years.
No stock transfers took place as part of the purchase agreement,
and no director or shareholder of First American was made a
director or shareholder in Western Dakota. The purchase contract
specifically excluded "any of [First American's] debts or accounts
payable and other liabilities." Western Dakota paid First American
$100,000 in advance to be applied toward the percentage of
commissions it would pay in the future.

Although Parker's agreement entitled her to a portion of
First American's commissions, First American never shared with her
any part of Western Dakota's payments. Neither did Western Dakota
make any payments to her, even after she demanded that it honor
her contract. Following the sale to Western Dakota, First American
filed for Chapter 7 bankruptcy and ceased business operations.
Travelers Indemnity Company, as a secured creditor, took control
of the remaining assets and sold them, accumulating approximately
$1.3 million to pay over $2 million in liabilities.

Parker sued Western Dakota for breach of contract,
conversion, and unjust enrichment. The circuit court reviewed the
First American-Western Dakota agreement, found it unambiguous, and
ruled that, as a matter of law, Western Dakota became obligated to
Parker because it "purchased" Parker's contract with First
American. Consequently, the court granted judgment to Parker on
her claim for breach of contract. With liability issues decided,
the only question remaining was the amount of damages. The parties
agreed to waive a jury trial and to try the damage issue to the
court.

In its judgment, the court ruled that Western Dakota owed Parker $34,102 in back compensation. Moreover, in accord with the Parker Agreement, Western Dakota was also ordered to pay monthly Parker's percentage of commissions received.

Unknown

Unknown

Affirmed in part and reversed in part by the South Dakota Supreme Court. See: 2000 SD 14, ___ N.W.2d ___. Note: The above date reflects the appellate court decision date, not the original trial date. Reported by kkm.