Opinion ID: 2193195
Heading Depth: 1
Heading Rank: 2

Heading: renewal commissions

Text: The plaintiffs also claim that the trial court improperly rendered summary judgment on the first, second and fifth counts of their complaint, respectively alleging conversion, statutory theft and breach of contract for the nonpayment of renewal commissions in accordance with § 38a-709. See footnote 3 of this opinion. Specifically, the plaintiffs contend that the trial court improperly concluded that the claims were time barred because the allegations in their fifth amended complaint did not relate back to those in their fourth amended complaint. They further contend that the defendants' failure to comply with the statutory requirement to pay renewal commissions constituted a breach of contract and a violation of the implied duty of good faith and fair dealing. Finally, they contend that the defendants' failure to pay the renewal commissions provides a basis for conversion and theft. We agree with the plaintiffs that the counts relating to the renewal commissions in the fifth amended complaint relate back to the fourth amended complaint and thus are not time barred. We also agree that a violation of § 38a-709 may provide a legal basis for the plaintiffs' breach of contract claim. We reject, however, the plaintiffs' contention that the facts supporting the conversion and theft counts legally can sustain those causes of action.
We begin with the issue of whether the trial court properly determined that the allegations in the fifth amended complaint did not relate back to those in the fourth amended complaint and, therefore, were time barred. The plaintiffs contend that, although their earlier complaints alleged that the defendants had misappropriated their book of business, they submitted evidence to the trial court to establish that this general term is understood in the insurance industry to include all existing policies serviced by the agent and the commissions that are generated by the renewal of those commissions. In support thereof, the plaintiffs point to the express reference in their earlier complaints to § 38a-709 (c), which mandates the payment of such renewal commissions for a prescribed period of time. The defendants respond that these counts in the fifth amended complaint depend on different facts to prove a different theory of liability than those in the fourth amended complaint. The defendants point to the fact that, unlike the fifth amended complaint, the earlier complaints never referenced renewal commissions, only renewals, and never alleged that the plaintiffs were producers or had been terminated by Nationwide, which are required elements of a claim under § 38a-709. We agree with the plaintiffs that the claims relate back and, therefore, are not time barred. The relation back doctrine has been well established by this court. A cause of action is that single group of facts which is claimed to have brought about an unlawful injury to the plaintiff and which entitles the plaintiff to relief.... A right of action at law arises from the existence of a primary right in the plaintiff, and an invasion of that right by some delict on the part of the defendant. The facts which establish the existence of that right and that delict constitute the cause of action.... It is proper to amplify or expand what has already been alleged in support of a cause of action, provided the identity of the cause of action remains substantially the same, but where an entirely new and different factual situation is presented, a new and different cause of action is stated.... Our relation back doctrine provides that an amendment relates back when the original complaint has given the party fair notice that a claim is being asserted stemming from a particular transaction or occurrence, thereby serving the objectives of our statute of limitations, namely, to protect parties from having to defend against stale claims.... (Internal quotation marks omitted.) Alswanger v. Smego, 257 Conn. 58, 64-65, 776 A.2d 444 (2001). Mindful of this standard, we compare the allegations in the plaintiffs' fourth and fifth amended complaint. The fourth amended complaint sets forth the following allegations in relevant part: 4. In the insurance business there is a term called `expirations' which refers to the expiration date of a customer's insurance policy. The agent safeguards [his or] her book of business which includes the name and address of the insured together with the type of insurance purchased, the amount of coverage, the premium and most particularly the expiration. The expiration becomes a key date to trigger renewal solicitations.... 6. Notwithstanding [the] plaintiff's ownership of said book of business, the ... defendants misappropriated the ... book of business. 7. At the time of [the] plaintiff's termination ... the plaintiff had been a Nationwide agent for a substantial period of time .... The plaintiff's sole means of earning a living was only as an insurance agent.... 9. [The defendants'] misappropriation of the plaintiff's book of business, including the renewals in violation of ... [§ ] 38a-709 (c), caused loss and damage to the plaintiff. The only substantive change to the fifth amended complaint was to paragraph nine, which was revised to allege in relevant part: [The defendants] terminated [the] plaintiff as a Nationwide agent and then misappropriated that portion of [the] plaintiff's book of business, as described herein, in regard to fire and casualty insurance renewal commissions ... [the] plaintiff was a producer, which includes an insurance agent like the plaintiff who is appointed by an insurer like the defendants to act on the insurer's behalf; [the] defendants renewed customers' contracts of insurance for fire and casualty insurance for which [the] plaintiff was recognized as the agent/producer who wrote said contracts of insurance at the time of [the] plaintiff's termination; the defendants have failed to account for renewal commissions generated by said renewals and ha[ve] failed to pay such amounts to [the] plaintiff as required by ... [§ ] 38a-709 (c), all to the plaintiff's loss and damage. In our view, the allegations in the fifth amended complaint that the defendants had failed to pay renewal commissions as required under § 38a-709 (c), although more specific and artfully drafted than those in the fourth amended complaint, relate back to the earlier complaint. The plaintiffs had alleged in the fourth amended complaint that their book of business contained the expiration [of each policy that] becomes a key date to trigger renewal solicitations and that the defendants misappropriat[ed] ... the plaintiff's book of business, including the renewals in violation of ... [§ ] 38a-709 (c) .... (Emphasis added.) Section 38a-709 provides in relevant part: (a) Any insurance company authorized to transact fire or casualty business in this state shall, upon termination of a producer's appointment by said company, permit the renewal of all contracts of insurance written by such producer for a period of eighteen months from the date of such termination .... (c) Any insurance company renewing contracts of insurance in accordance with this section shall pay commissions for such renewals to the terminated producer in the same amount as had been paid to him on similar policies during the twelve months immediately preceding the notice of termination.... Thus, the only conduct to which the statute is directed is the renewal of policies after termination and the payment of renewal commissions resulting therefrom. Although the allegations in the fourth amended complaint clearly were broader, as evidenced by the allegation that the misappropriation of the book of business includ[ed] the renewals, indicating that the book of business was key to soliciting both new policies and renewals, the narrower focus in the fifth amended complaint does not preclude the allegations therein from relating back to the earlier complaint. Admittedly, it is not clear from the fourth amended complaint whether the plaintiffs were alleging that, as a result of the defendants' misappropriation of their book of business, the plaintiffs were unable to solicit their customers to renew expiring Nationwide policies or that the defendants were able to solicit the plaintiffs' former customers to renew expiring policies. In either case, however, the harm is identical  the loss of renewal commissions to which the plaintiffs claimed they were entitled under § 38a-709. We also disagree with the defendants' contention that the plaintiffs' allegations referring to renewals, rather than renewal commissions, and insurance agent or Nationwide agent, rather than producer are dispositive, especially given the express reference to § 38a-709. [23] In Connecticut, we long have eschewed the notion that pleadings should be read in a hypertechnical manner. Rather, [t]he modern trend, which is followed in Connecticut, is to construe pleadings broadly and realistically, rather than narrowly and technically.... [T]he complaint must be read in its entirety in such a way as to give effect to the pleading with reference to the general theory upon which it proceeded, and do substantial justice between the parties.... Our reading of pleadings in a manner that advances substantial justice means that a pleading must be construed reasonably, to contain all that it fairly means, but carries with it the related proposition that it must not be contorted in such a way so as to strain the bounds of rational comprehension. (Citation omitted; internal quotation marks omitted.) ATC Partnership v. Windham, 268 Conn. 463, 466 n. 4, 845 A.2d 389 (2004). Reading the plaintiffs' fourth amended complaint broadly, but reasonably, we conclude that the fifth amended complaint relates back to the fourth amended complaint. Therefore, the trial court improperly concluded that the claims were time barred.
We turn, therefore, to the merits of the plaintiffs' conversion, theft and breach of contract counts relating to the nonpayment renewal commissions in accordance with § 38a-709. With respect to the conversion and theft counts, the plaintiffs assert identical contentions to those they had made in support of their conversion and theft counts relating to the nonpayment of deferred compensation. Similarly, the plaintiffs have not established, nor have they even alleged, that they ever had legal title to, or possession of, those commissions, a required legal element of such causes of action. See Macomber v. Travelers Property & Casualty Corp., supra, 261 Conn. at 650, 804 A.2d 180. Therefore, for the same reasons we set forth in part I B of this opinion, the plaintiffs' allegations predicated merely on the failure to pay money owed cannot provide the basis for an action in conversion and theft with respect to the nonpayment of renewal commissions. With respect to the breach of contract count, the plaintiffs claim that the trial court incorrectly determined that the contract imposes no express obligation on the defendants to pay renewal commissions and that the plaintiffs improperly were seeking to hold the defendants liable for an implied violation of an implied contractual provision. The plaintiffs contend that, because the contract specifically recognizes an agent's entitlement to renewal commissions, the posttermination rights under § 38a-709 must be considered incorporated therein as a matter of law. They, therefore, contend that the defendants' failure to pay the renewal commissions in accordance with § 38a-709 breached the terms of the contract and the implied covenant of good faith and fair dealing. The defendants maintain that the trial court properly rendered summary judgment because the contract is devoid of any promise by the defendants to pay the plaintiffs renewal commissions. They similarly contend that the implied covenant of good faith and fair dealing does not provide a basis for the action given the absence of any express obligation. Thus, the issue before us is not one of statutory construction, in that both parties proceed from the premise that the obligation to comply with § 38a-709 must arise from the contract itself. They differ, however, on the specificity of the obligation required in the contract to support a breach of contract action. We conclude that the trial court improperly rendered summary judgment because it is not certain as a matter of law that § 38a-709 is not an implied term of the contract. We have explained that [t]he law ... is that `statutes existing at the time a contract is made become a part of it and must be read into it just as if an express provision to that effect were inserted therein, except where the contract discloses a contrary intention.' Ciarleglio v. Benedict & Co., 127 Conn. 291, 293, 16 A.2d 593 (1940); Hatcho [Corp.] v. Della Pietra, 195 Conn. 18, 21, 485 A.2d 1285 (1985).... Long ago, the United States Supreme Court added emphasis to the principle that the law subsisting at the time the contract is made governs as if expressly referred to in the agreement when it held that `[t]his principle embraces alike those which affect its validity, construction, discharge, and enforcement.' Von Hoffman v. Quincy, 71 U.S. (4 Wall.) 535, 550, 18 L.Ed. 403 (1866); see Cislo v. Shelton, 35 Conn.Supp. 645, 652, 405 A.2d 84 (1978). All Brand Importers, Inc. v. Dept. of Liquor Control, 213 Conn. 184, 199, 567 A.2d 1156 (1989); accord 17A Am.Jur.2d 357-59, Contracts § 371 (2004) (Contracting parties are presumed to contract in reference to the existing law, and to have in mind all the existing laws relating to the contract, or to the subject matter thereof. All existing applicable or relevant and valid statutes, ordinances, regulations, and settled law of the land at the time a contract is made become a part of it and must be read into it just as if an express provision to that effect were inserted therein, except where the contract discloses a contrary intention.). It is important to emphasize, however, the limitation of this principle to the extent that it embraces alike those [laws] which affect [the contract's] validity, construction, discharge, and enforcement . (Emphasis added; internal quotation marks omitted.) All Brand Importers, Inc. v. Dept. of Liquor Control, supra, 213 Conn. at 199, 567 A.2d 1156; see, e.g., Rizzo Pool Co. v. Del Grosso, 240 Conn. 58, 76-77 n. 18, 689 A.2d 1097 (1997) (whenever there is an attorney's fees clause in the commercial party's contract, that clause is subject to [General Statutes] § 42-150aa, and the contract must be read as incorporating that provision's 15 percent limitation); Sanghavi v. Paul Revere Life Ins. Co., 214 Conn. 303, 307, 572 A.2d 307 (1990) (concluding that income option rider to disability insurance policy was invalid because it violated insurance law under then General Statutes § 38-167, now General Statutes § 38a-483). Thus, although we incorporate a law as if an express term of the contract to construe the scope or validity of an obligation already embraced within the terms of the contract, we do not incorporate the law to create a substantive obligation where none previously had existed. [24] See Hatcho Corp. v. Della Pietra, supra, 195 Conn. at 21, 485 A.2d 1285 (Referencing the statute to construe an obligation in the contract but noting: [A] court cannot import into the agreement a different provision nor can the construction of the agreement be changed to vary the express limitations of its terms.... We assume no right to add a new term to a contract.... [Citation omitted; internal quotation marks omitted.]). We turn, therefore, to the parties' contract. It is undisputed that the contract does not reference expressly § 38a-709 or the subject of posttermination renewal commissions. Therefore, the question is whether the contract embraces any obligation on the defendants' part to pay renewal commissions such that § 38a-709 should be read as if it were an express term of the contract to determine the validity, construction, discharge, or enforcement of that obligation. The plaintiffs point to paragraph seven of the contract as evidence of such an obligation. Paragraph seven of the contract, entitled Compensation, provides in relevant part: It is agreed that we will pay you any and all original and renewal commissions earned by you, but not credited to your account at the time of entering into this [a]greement, on business written by you while employed by us under our [a]gent's [e]mployment [a]greement. It is understood, however, that we may deduct from any compensation due you under this [a]greement any commissions previously credited to your account while an employee agent, which subsequently become unearned as a result of the termination or lapse of any policy or coverage. It is evident that this provision acknowledges some obligation on the defendants' part to pay renewal commissions to some persons. The provision only expressly addresses, however, commissions earned under a pre-existing contract, an [a]gent's [e]mployment [a]greement, which previously had been earned but not credited to an employee agent's account at the time of the execution of the contract at issue in the present case. It is unclear whether this provision implicitly acknowledges a continuing obligation to pay renewal commissions. It also is unclear whether the plaintiffs previously were employee agents who would have been entitled to renewal commissions under an agent employment agreement. Thus, the extent and applicability of any contractual obligation to pay renewal commissions to the plaintiffs in the present case is unclear. To the extent that the plaintiffs claim that § 38a-709 must be incorporated as a term of the contract merely by virtue of a reference to renewal commissions, irrespective of whether the contract creates an obligation to pay renewal commissions to the plaintiffs, we disagree. Section 38a-709 cannot be incorporated to construe the extent of the defendants' obligation under the contract to pay renewal commissions unless such an obligation exists thereunder. As we previously have explained, absent an express indication by the legislature; see footnote 24 of this opinion; we do not engraft laws onto a contract to create substantive obligations, enforceable by an action in contract, where no such obligation previously had existed. Given, however, the ambiguities that we have identified in paragraph seven as to an obligation on the defendants' part under this contract to these plaintiffs to pay renewal commissions, it is not certain as a matter of law that the defendants were not so obligated. Indeed, the plaintiffs' affidavits attest that the policies subject to renewal commissions in this action are policies on which, during the year before [their] termination, [they] had received commissions from [the defendants] based on their sale or renewal . [25] (Emphasis added.) Accordingly, the trial court improperly rendered summary judgment on the breach of contract count.