Spencer v. Home Insurance Company Et Al., 218 Ga. App. 85, 460 S.E.2d 545 (1995)
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Summary
Judgment affirmed in Case Nos. A95A0813 and A95A0815. Judgment reversed in Case No. A95A0814. Beasley, C. J., and Ruffin, J., concur.
Summary
Judgment affirmed in Case Nos. A95A0813 and A95A0815. Judgment reversed in Case No. A95A0814. Beasley, C. J., and Ruffin, J., concur.
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Troutman Sanders, Thomas E. Campbell, Daniel S. Reinhardt, for Home Insurance Company.Chambers, Mabry, McClelland & Brooks, E. Speer Mabry III, Edwin L. Hamilton, R. Michael Malcom, for Unified Services.
Plaintiff Home Insurance Company ("Home") and defendant Unified Services, Inc. ("US I") entered into a "Broker Agreement" in which Home agreed to provide insurance for USI's client and bill USI on a monthly basis. The agreement contemplated that USI would bill the client for the premiums plus a commission, and that USI would then remit the premiums to Home. Although this arrangement worked successfully for several years, in early 1992 USI failed to pay Home for its client's premiums, even though the client did pay USI. The client subsequently changed brokers and continued using Home as its insurer.
Home brought this suit for action on account/breach of contract and conversion, and USI counterclaimed for breach of contract and tortious interference with its business relations with its client. In addition to suing USI, Home sued defendants Spencer and Atkins, USI's principals, on an alter-ego theory. Defendants filed a motion to dismiss Home's conversion claim, and all the parties filed motions for summary judgment. The trial court's orders on these motions are the subject of these appeals: in Case No. A95A0813, defendants appeal the grant of summary judgment to Home regarding defendants' liability for breach of contract as well as Home's nonliability for tortious interference with business relations; in Case No. A95A0814, Home appeals the trial court's dismissal of its conversion claim; and in Case No. A95A0815, defendant Spencer appeals the trial court's denial of his motion for summary judgment on Home's alter-ego theory.
Case No. A95A0813
1. USI first contends that the trial court erred in granting summary judgment for Home on Home's action on account/breach of contract claim. It is undisputed that USI failed to remit premiums it owed to Home under the parties' agreement. USI nonetheless suggests that questions of fact remain because the parties subsequently reached a new agreement, in which Home allegedly agreed to retain US I's future commissions and apply them to the amount USI owed, and Home allegedly breached this new agreement.
Analytically, however, the possibility that Home breached the new agreement cannot negate USI's prior breach of the original agreement and thus does not preclude entry of partial summary judgment for Home on the issue of US I's debt on account/breach. It could affect the damages USI owes Home, of course, which is why the court only granted partial summary judgment rather than entering a final judgment. USI has a counterclaim against Home for the commissions allegedly owed it under the new agreement, and the court's partial summary judgment order did not affect this counterclaim. Thus, to the extent the jury at trial finds Home owes USI commissions, this amount will be offset against the amount USI owes Home.
2. USI also argues that the trial court erred in granting summary judgment against it on its counterclaim for tortious interference with business relations. To establish a cause of action for this tort, USI would have to show, among other things, that Home's actions induced USI's client not to continue its business relationship with USI. See St. Mary's Hosp. of Athens v. Radiology Professional Corp.,
Case No. A95A0814
4. In its cross-appeal, Home contends that the trial court erred in dismissing its tort-based cause of action for conversion (and its concomitant claim for punitive damages) for failure to state a claim. "A motion to dismiss is . . . not to be granted unless under the pleadings, construed in a light most favorable to the plaintiff, plaintiff can establish no set of facts that would entitle it to relief against the defendant. [Cits.]" Wehunt v. ITT Business Communications Corp.,
(a) While a tort action cannot be based on the breach of a contractual duty only, it can be based on conduct which, in addition to breaching a duty imposed by contract, also breaches a duty imposed by law. Commercial Bank &c. Co. v. Buford,
This case presents just the type of situation described. In failing to remit premium payments for the client to plaintiff, defendants not only breached their duties under the contract, but also breached statutory and fiduciary duties imposed by law. Under OCGA
USI posits that it was not transmitting its client's premiums to Home; instead, the client had a contractual obligation to pay USI, and USI had an independent contractual obligation to pay Home, regardless of whether the client paid. This position, however, is belied by the Broker Agreement as well as common sense. Although USI quotes language from the Agreement suggesting it was obligated to pay Home even if the client did not pay it, the quote conveniently omits words which clarify that USI was only obligated to do so if it failed to exercise its option to notify Home of the nonpayment and turn the account over to Home for collection within 30 days. In other words, USI was not obligated to pay for a nonpaying client unless it chose to do so and accept the risk that the client might not pay.
"While an independent insurance agent or broker is normally considered the agent of the insured, it can also be a dual agent for both the insurer and the insured." Byrne v. Reardon,
(b) "In order to present a cause of action for conversion an act of dominion over the personal property of another inconsistent with his rights . . . must be shown." (Citations and punctuation omitted.) Hurston, 185 Ga. App. at 511; see also Stanford v. Otto Niederer & Sons, Inc.,
USI asserts that it could not have converted the client's premium payments because Home never gained title to those payments (i.e., the payments never became Home's personal property). The flip side to our conclusion that USI owed Home fiduciary duties with respect to premium payments, however, is that Home had an equitable interest in the payments as soon as the client made them. And actions inconsistent with any legal interest in personalty may give rise to a conversion claim; legal title to the personal property is not necessary. Privitera v. Addison,
For these reasons, Home's complaint stated a cause of action for conversion, and the trial court's dismissal of this claim is reversed.
Case No. A95A0815
5. In this appeal, defendant Spencer argues that he should have been granted summary judgment with respect to Home's efforts to
pierce the corporate veil and hold him personally liable. There is evidence in the record, however, that Spencer and Atkins, the sole shareholders of USI: (1) transferred assets of USI to a newly formed corporation, without compensation to USI, right around the time USI was unable to pay Home; (2) wrote off as uncollectible a debt owed to USI by a partnership in which Spencer and Atkins were partners; (3) withdrew money from USI at will in lieu of salary; and (4) borrowed money from USI without paying interest. This evidence is sufficient to create a question of fact about whether the corporate veil should be pierced. See Abbott Foods of Ga. v. Elberton Poultry Co.,
King & Carragher, Kevin S. King, Joseph R. Carragher, for Spencer.
1995
Notes:
1. The trial court held this statute was not intended to create a private cause of action, but this does not render the statute irrelevant to an evaluation of the broker/agent's duties. cf. Bank of Spalding County v. Pound,
2. Morris v. National Western Life Ins. Co.,
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