Case Title: Rash v. Hilb Rogal & Hamilton Co.

Citation: 

Docket Number: 950896

State: virginia

Court: Virginia Supreme Court

Date: 1996-03-01T00:00:00Z

Document:
Present:  All the Justices 
 
TIMOTHY R. RASH, ET AL. 
 
OPINION BY JUSTICE LEROY R. HASSELL, SR. 
v.   Record No. 950896                  March 1, 1996 
 
HILB, ROGAL & HAMILTON  
COMPANY OF RICHMOND 
 
 
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 
 
Randall G. Johnson, Judge 
 
 
I. 
 
 
In this appeal, we consider issues that arose during the 
trial of a suit in equity for a breach of contract, tortious 
interference with contractual relations, and common law 
conspiracy.   
 
II. 
 
Hilb, Rogal & Hamilton Company of Richmond (HRH) filed its 
amended bill of complaint against Susan M. Rash, Timothy R. Rash, 
and Rash & Associates, Inc., a Virginia corporation.  HRH alleged 
that Mr. Rash breached his employment agreement, which included a 
covenant not to compete.  HRH further alleged that Mrs. Rash 
tortiously interfered with its contractual relations and that Mr. 
and Mrs. Rash had engaged in a common law conspiracy.  HRH sought 
damages, injunctive relief, costs, and attorney's fees.   
 
At the conclusion of an ore tenus hearing, the chancellor 
held that these allegations had been proven.  The chancellor 
assessed damages against the Rashes and Rash & Associates and 
awarded costs, attorney's fees, and certain injunctive relief.  
The chancellor held that the Rashes and Rash & Associates are 
jointly and severally liable to HRH in the amount of $111,891, 
which was stipulated by the litigants to be 75% of all 
commissions that Mrs. Rash or Rash & Associates received from 
certain accounts that were formerly serviced by HRH.  The 
chancellor's decree established a constructive trust requiring 
that Mrs. Rash and Rash & Associates, as constructive trustees, 
pay to HRH 75% of all commissions earned from certain accounts 
that were formerly serviced by HRH.  The Rashes and Rash & 
Associates appeal.   
 
III. 
 
When a chancellor hears evidence ore tenus, his decree is 
entitled to the same weight as a jury verdict, and we are bound 
by the chancellor's findings of fact unless they are plainly 
wrong or without evidence to support them.  Morris v. Mosby, 227 
Va. 517, 522, 317 S.E.2d 493, 497 (1984).  Additionally, we will 
review the evidence and all reasonable inferences fairly deduced 
therefrom in the light most favorable to HRH, the prevailing 
party below.  Id.
 
HRH is an insurance sales firm which sells various types of 
insurance, including insurance benefits products.  In September 
1990, HRH purchased certain tangible and intangible assets of The 
James River Financial Group, Inc., including its division that 
sold insurance benefits products.   
 
As employees of the James River Financial Group, the Rashes 
were involved in the marketing of benefits insurance products.  
Mr. Rash was part owner of the James River Financial Group, and 
he received a portion of the purchase price when HRH acquired the 
James River Financial Group's assets.   
 
After HRH acquired the James River Financial Group's assets, 
Mr. Rash became a senior vice president of HRH.  In this 
capacity, he was in charge of HRH's group benefits division.  Mr. 
Rash's employment agreement with HRH, which he signed after 
consultation with legal counsel, contains a covenant that 
prohibits him from competing directly or indirectly against HRH 
upon termination of his employment.   
 
Mrs. Rash also became an employee of HRH.  She worked as a 
benefits consultant for HRH and, in that capacity, she had 
complete access to HRH's confidential customer and business 
information.  She also worked closely with Mr. Rash, and she 
accompanied him when he tried to solicit new business accounts 
for HRH.  Mrs. Rash was not required to sign a covenant not to 
compete.   
 
In November 1992, Mr. Rash initiated negotiations with HRH 
to purchase its group benefits business.  According to Mr. Rash, 
Mrs. Rash was working "behind the scenes" during the negotiations 
to purchase the business from HRH.  During these negotiations, 
the Rashes decided that if they were unable to acquire HRH's 
group benefits division, Mrs. Rash would form her own competitive 
insurance company and solicit HRH's accounts.  Mr. Rash forwarded 
a letter to his attorney stating, "I definitely believe that 
either Susan or I would be successful in acquiring several of the 
accounts which they don't want to sell.  We could possibly keep 
them all!"  
 
Mr. Rash was unsuccessful in his attempt to purchase HRH's 
group benefits division.  Subsequently, the Rashes resigned from 
their employment with HRH effective March 31, 1994.  Later that 
day, the Rashes went to a store where Mrs. Rash used Mr. Rash's 
credit card to purchase a facsimile machine.  Mr. Rash knew that 
Mrs. Rash was purchasing this facsimile machine for use in her 
new business, Rash & Associates.  On another occasion, Mrs. Rash 
used her husband's credit card to purchase office equipment and a 
printer for Rash & Associates.  Ultimately, Rash & Associates 
reimbursed Mr. Rash for these expenses.   
 
During its first month of operation, Rash & Associates, 
which competed for HRH's insurance benefits accounts, conducted 
business in the Rashes' jointly-owned residence.  Mrs. Rash used 
her husband's leased automobile to conduct business on behalf of 
Rash & Associates.   
 
Mrs. Rash encountered problems when she tried to acquire 
operating capital for her new corporation.  The initial business 
purchases and operating expenses for her company were provided by 
Mr. Rash.  Mr. Rash deposited a check payable to him in the 
amount of $8,000 in a joint checking account that he owned with 
Mrs. Rash.  Mr. Rash knew that Mrs. Rash intended to use some of 
these funds to pay for Rash & Associates' operating expenses.   
 
Mrs. Rash informed Mr. Rash that she was trying to borrow 
money for Rash & Associates and that she had become frustrated 
with the process of borrowing money.  The Rashes discussed with 
their attorney the possibility of encumbering their jointly-owned 
home as security to obtain financing for Rash & Associates.  Mrs. 
Rash asked her husband if he would be willing to join in such a 
transaction.  Mr. Rash refused to do so.     
 
During a conversation with their attorney, the Rashes 
discussed the use of their jointly-owned mutual funds as 
collateral to obtain the necessary financing for Rash & 
Associates.  Subsequently, Mr. Rash assigned his interest in the 
mutual funds to his wife, who used them as collateral to obtain a 
loan for Rash & Associates.  Mr. Rash testified that he made the 
assignment because he did not want his name to appear on any 
documents relating to Rash & Associates.   
 
Rash & Associates eventually acquired many group benefits 
insurance accounts that had been serviced by HRH.  Mrs. Rash 
testified that in 1994, Rash & Associates received $136,011 in 
commissions, and $135,000 of those commissions were from former 
HRH accounts.   
 
IV. 
 
Mr. Rash asserts that the chancellor erred in holding that 
he violated his covenant not to compete and that he engaged in a 
competing business by allowing his wife to use jointly-held 
marital assets to fund Rash & Associates.  Additionally, Mr. Rash 
asserts that he did not "engage" in his wife's business.  HRH 
argues, and we agree, that there is substantial evidence to 
support the chancellor's finding that Mr. Rash breached his 
employment agreement.   
 
The covenant not to compete states in relevant part: 
 
[After termination, Mr. Rash] shall not directly or 
indirectly as an owner, stockholder, director, 
employee, partner, agent, broker, consultant or other 
participant, for a period of three (3) years from the 
date of such termination: 
 
 
. . . .   
 
 
 
(e) engage in any manner in any business competing 
directly or indirectly with [HRH]. 
 
(Emphasis added). 
 
As we have often stated, "[t]he parties' contract becomes 
the law of the case unless it is repugnant to some rule of law or 
public policy."  Winn v. Aleda Const. Co., 227 Va. 304, 307, 315, 
315 S.E.2d 193, 194 (1984).  Accord D.C. McClain, Inc. v. 
Arlington County, 249 Va. 131, 135, 452 S.E.2d 659, 662 (1995).  
Additionally, we "must give effect to the intention of the 
parties as expressed in the language of their contract, and the 
rights of the parties must be determined accordingly."  Foti v. 
Cook, 220 Va. 800, 805, 263 S.E.2d 430, 433 (1980). 
 
The record is replete with evidence that Mr. Rash acted as a 
participant who, at the very least, indirectly engaged in a 
business that competed against HRH.  For example, as we mentioned 
above, Mr. Rash relinquished his interest in a jointly-owned 
mutual fund account so that Mrs. Rash could use those funds as 
collateral to secure a loan that was used for operating capital 
for Rash & Associates.  And, as the chancellor found, Rash and 
Associates would not have been able to conduct business without 
this loan.   
 
V. 
 
The Rashes challenge that portion of the chancellor's decree 
awarding damages against them.  Mrs. Rash asserts that she did 
not tortiously interfere with Mr. Rash's contract with HRH or 
with HRH's business expectancies.  Further, she contends that the 
chancellor erred by awarding contract damages on the tortious 
interference claim and that the damages were punitive and without 
relationship to the actual harm suffered by HRH.  Mr. Rash argues 
that the chancellor erred in imposing liquidated damages against 
him because his contract of employment purportedly does not 
provide for such damages.  He also claims that the liquidated 
damage provision in his contract is unenforceable because it 
bears no relationship to the actual losses sustained by HRH.   
 
As HRH observes, we cannot consider these arguments advanced 
by the Rashes because there is an independent basis to support 
the chancellor's ruling on these issues and that basis has not 
been challenged on appeal.  In his final decree, the chancellor 
found that the Rashes had engaged in a common law conspiracy 
against HRH.  The chancellor made a unitary award of damages, and 
an unspecified portion of those damages are compensation for the 
Rashes' common law conspiracy against HRH.  The Rashes do not 
assign error to the chancellor's finding that they had engaged in 
a common law conspiracy; nor do they assign error to that portion 
of the chancellor's decree which awards damages to HRH because of 
the Rashes' common law conspiracy. 
 
Therefore, those portions of the chancellor's decree holding 
that the Rashes had engaged in a common law conspiracy and that 
HRH is entitled to recover damages resulting from that conspiracy 
have become final and are not before this Court on appeal.  Rule 
5:17(c); see United Leasing Corp. v. Thrift Ins. Corp., 247 Va. 
299, 308, 440 S.E.2d 902, 907 (1994); Crist v. Metropolitan 
Mortgage Fund, 231 Va. 190, 193, 343 S.E.2d 308, 310 (1986); 
Stamie E. Lyttle Co. v. County of Hanover, 231 Va. 21, 27, 341 
S.E.2d 174, 178 (1986); Haynes v. Bekins Van & Storage Co., 211 
Va. 231, 233, 176 S.E.2d 342, 344 (1970).   
 
VI. 
 
The Rashes assert that the trial court erred by imposing a 
constructive trust in favor of HRH.  We disagree. 
 
In Leonard v. Counts, 221 Va. 582, 588-89, 272 S.E.2d 190, 
195 (1980), we stated: 
 
 
Constructive trusts are those which the law 
creates, independently of the intention of the parties, 
to prevent fraud or injustice.  Porter v. Shaffer, 147 
Va. 921, 928, 133 S.E. 614, 616 (1926).  While there is 
a distinction between resulting and constructive 
trusts, albeit often difficult to determine, the same 
remedial principles apply to both.  Id. at 928-29, 133 
S.E. at 616.  Constructive trusts have also been 
defined more comprehensively as follows:   
 
 
 
"Constructive trusts arise, independently of 
the intention of the parties, by construction 
of law; being fastened upon the conscience of 
him who has the legal estate, in order to 
prevent what otherwise would be a fraud.  
They occur not only where property has been 
acquired by fraud or improper means, but also 
where it has been fairly and properly 
acquired, but it is contrary to the 
principles of equity that it should be 
retained, at least for the acquirer's own 
benefit."  
 
 
1 Minor on Real Property § 462 at 616 (2d ed. Ribble 
1928). 
 
Accord Overby v. White, 245 Va. 446, 449-50, 429 S.E.2d 17, 19 
(1993); Greenspan v. Osheroff, 232 Va. 388, 400, 351 S.E.2d 28, 
36-37 (1986). 
 
Here, the chancellor found that the Rashes engaged in a 
common law conspiracy by diverting HRH's contracts to Mrs. Rash's 
corporation.  Certainly, such conduct constitutes an improper 
means which, under the facts and circumstances of this case, 
justifies the imposition of the constructive trust.  
 
VII. 
 
Because we find no error in the decree appealed from, it 
will be affirmed. 
 
Affirmed.